Kenya’s Treasury has explained the rationale for the proposed changes to the Kenya Revenue Authority (KRA) tax-filing return deadlines in the Finance Bill 2026.
According to the Ministry, the changes are aimed at improving efficiency in tax administration and strengthening compliance systems within the authority.
Moving deadlines earlier, the Ministry states, allows the tax authority to verify and validate returns within the same financial cycle, improving revenue forecasting and reducing discrepancies.
Treasury Clarifies Finance Bill 2026 Cutting Tax Filing Window to April 30
According to the Treasury, the move will also enhance revenue forecasting, reduce discrepancies in tax data, and support a more structured, data-driven compliance framework.
From a governance perspective, this supports a shift toward a data-driven, proactive compliance system, even though it introduces short-term pressure on taxpayers to adjust.
Treasury Cabinet Secretary John Mbadi has proposed compressing the tax filing deadline by two months, from June 30 to April 30.
The Finance Bill 2026 seeks to amend Section 52 of the Income Tax Act by replacing the phrase “within a reasonable time, not being less than thirty days from the date of service of the notice” with “by the last day of the fourth month following the end of the person’s year of income.”
The Bill also introduces a new subsection (1A), requiring that a return relating to a nil amount of tax payable be filed within one month after the end of the year of income.
In addition, the proposal replaces the current wording in subsections (i) and (ii) of Section 52(1), which sets filing at “not later than the last day of the sixth month,” with a new deadline of “by the last day of the fourth month following the end of the person’s year of income.”
The Finance Bill 2026 further provides for a nil-return rule, requiring such returns to be submitted within one month after the end of the financial year.
Also Read: Goods That Will Be Exempted from VAT Under Finance Bill 2026
Treasury Defends 25% Mobile Phone Excise Duty
On the proposed 25% excise duty on mobile phones, the Treasury said the measure is intended to broaden the tax base within the digital economy by shifting taxation toward participation in the sector rather than imports alone.
Treasury said the adjustment would enhance the efficiency of tax administration by allowing earlier verification and validation of returns within the same financial cycle.
It added that the reform would improve revenue forecasting, reduce discrepancies in tax data, and support a more structured, data-driven compliance system.
Mitumba Imports Under New Tax Model
The Treasury also outlined a new 5 percent presumptive tax framework on mitumba imports, saying the system will apply 16 percent VAT at the point of entry, after which a 5 percent profit margin is assumed on resale. That profit is then subjected to a one-off 30 percent income tax, with no additional taxes applied thereafter.
According to the Treasury, the approach consolidates what was previously a fragmented tax structure into a single, predictable system, removing multiple points of taxation across the trade chain. It said the model is designed to reduce administrative complexity and ease compliance for traders.
The framework was developed following consultations with mitumba traders, who agreed on the need to anchor taxation at clearly defined points, including entry and presumed income.
Also Read: How New Tax Proposals in Finance Bill 2026 Will Affect Mitumba and Smartphones
Other Tax Measures in Finance Bill 2026
At the same time, the proposed increase in residential rental income tax from 7.5 percent to 10 percent is supported by enforcement reforms, including agent-based withholding systems meant to improve compliance rather than simply raise rates.
On VAT on digital financial services, the Treasury said the Finance Bill seeks to standardize taxation across fintech platforms.
It also seeks to close existing regulatory gaps and ensure tax neutrality in the digital financial sector.
Withholding tax on interchange and merchant fees targets previously under-taxed financial transaction streams and is intended to strengthen tax collection at source through direct deductions.
The deemed dividend tax, which applies to 60 percent of undistributed income, is intended to curb prolonged tax deferral and ensure that retained earnings are commercially justified rather than used to avoid taxation.
PAYE Concerns and Broader Reforms
Additionally, the Treasury acknowledged concerns that salaried workers continue to shoulder a heavier tax burden.
It stated that the reforms aim to broaden the tax base that targets under-taxed sectors such as digital services, informal trade, and corporate structures.
It further said public participation on the Finance Bill remains ongoing, describing the reforms as iterative and aimed at achieving a more balanced and sustainable tax system.
