[Kenya] Cabinet approves Finance Bill 2025 changing how employers calculate PAYE

In Kenya, the Cabinet has approved the Finance Bill 2025, which includes key changes to how employers calculate Pay As You Earn (PAYE) taxes for employees, Kenyans reports.

Under the Bill, employers will be required to automatically apply all eligible tax reliefs and exemptions when calculating PAYE taxes for employees. 

The move is reportedly the Cabinet’s response to many employers omitting the reliefs, forcing employees to seek refunds from the Kenya Revenue Authority (KRA). 

The Cabinet dispatch reads, ''Employers will also be required to automatically apply all eligible tax reliefs and exemptions when calculating Pay As You Earn (PAYE) taxes for employees. Currently, many employers omit these reliefs, forcing employees to seek refunds from the Kenya Revenue Authority. These reforms underpin the Bottom-Up Economic Transformation Agenda (BETA) and reinforce the government’s commitment to building a stronger, more inclusive economy." 

According to the Cabinet, the changes will be part of government efforts to minimise tax-raising measures in the preceding financial years. 

In addition, the Cabinet reportedly noted a scheme in which some Kenyans had used the tax refund claims to siphon funds from public coffers, such as through inflated tax refund claims, hence the PAYE changes.

Kenyans will now avoid the long queues of previous years at KRA offices for those following up on tax refunds. While small business operators will be able to fully deduct the cost of everyday tools and equipment in the year of purchase, eliminating unnecessary delays in accessing tax relief.

The Finance Bill 2025 will reportedly include provisions to streamline tax refund processes, seal legal gaps that delay revenue collection, and reduce tax disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.

Further amendments to the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act could follow, in line with the conditions that the International Monetary Fund (IMF) and the World Bank made a condition for lending and other financial obligations.

On April 8, in an interview with Bloomberg, the World Bank stated that it would unlock further financing for Kenya if President William Ruto's government implemented wide-ranging economic reforms agreed in 2024.

Source: Kenyans 

(Quote via original reporting)

In Kenya, the Cabinet has approved the Finance Bill 2025, which includes key changes to how employers calculate Pay As You Earn (PAYE) taxes for employees, Kenyans reports.

Under the Bill, employers will be required to automatically apply all eligible tax reliefs and exemptions when calculating PAYE taxes for employees. 

The move is reportedly the Cabinet’s response to many employers omitting the reliefs, forcing employees to seek refunds from the Kenya Revenue Authority (KRA). 

The Cabinet dispatch reads, ''Employers will also be required to automatically apply all eligible tax reliefs and exemptions when calculating Pay As You Earn (PAYE) taxes for employees. Currently, many employers omit these reliefs, forcing employees to seek refunds from the Kenya Revenue Authority. These reforms underpin the Bottom-Up Economic Transformation Agenda (BETA) and reinforce the government’s commitment to building a stronger, more inclusive economy." 

According to the Cabinet, the changes will be part of government efforts to minimise tax-raising measures in the preceding financial years. 

In addition, the Cabinet reportedly noted a scheme in which some Kenyans had used the tax refund claims to siphon funds from public coffers, such as through inflated tax refund claims, hence the PAYE changes.

Kenyans will now avoid the long queues of previous years at KRA offices for those following up on tax refunds. While small business operators will be able to fully deduct the cost of everyday tools and equipment in the year of purchase, eliminating unnecessary delays in accessing tax relief.

The Finance Bill 2025 will reportedly include provisions to streamline tax refund processes, seal legal gaps that delay revenue collection, and reduce tax disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.

Further amendments to the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act could follow, in line with the conditions that the International Monetary Fund (IMF) and the World Bank made a condition for lending and other financial obligations.

On April 8, in an interview with Bloomberg, the World Bank stated that it would unlock further financing for Kenya if President William Ruto's government implemented wide-ranging economic reforms agreed in 2024.

Source: Kenyans 

(Quote via original reporting)