President William Ruto has officially signed the Finance Bill 2025 into law, implementing a comprehensive package of tax reforms set to take effect on July 1, 2025.
The Finance Act 2025 signifies a crucial step in the government’s strategy to enhance revenue collection, modernize tax administration, and stimulate economic recovery and growth during the 2025/26 fiscal year.The new legislation amends several key tax statutes, including the Income Tax Act, the Excise Duty Act, the Stamp Duty Act, the Value Added Tax (VAT) Act, and the Tax Procedures Act.
According to the National Treasury, these reforms are designed not only to broaden the tax base but also to tackle revenue leakages that hinder efficient tax collection. By establishing a more predictable and investor-friendly tax environment, the reforms aim to encourage both domestic and foreign investment.
Major Tax Policy Changes Introduced
One of the most significant changes included in the Finance Bill is the amendment to the Income Tax Act, which now mandates that all employers automatically apply tax reliefs, exemptions, and deductions to their employees’ salaries. This new requirement is intended to reduce the compliance burden on employees, simplifying the payroll process, and ensuring that all tax deductions are accurately calculated in real-time. As a result, employees will have greater confidence in the tax deductions they see on their payslips, leading to enhanced financial transparency.
In addition, the government has increased support for employee welfare in the private sector. This includes provisions for enhanced tax incentives aimed at employers who invest in employee training, development programs, and health benefits. These measures are designed to not only improve employee satisfaction but also promote a skilled workforce that can contribute to economic growth.
Overall, the Finance Act 2025 reflects the government’s commitment to creating a robust and fair tax system, enabling sustainable development and improved public services for all Kenyans.
