KRA Cuts Fringe Benefit Tax to 9 percent, Lowest Rate Since January 2023

The Kenya Revenue Authority (KRA) has announced a reduction in the Fringe Benefit Tax (FBT) and Deemed Interest Rate to 9 percent for the second quarter of 2025.

KRA’ s moves comes following the Central Bank of Kenya’s recent decision to cut the benchmark interest rate to 10 percent.

In a public notice dated April 8, 2025, KRA stated that the revised rate will apply for the months of April, May, and June 2025, marking the lowest FBT rate since January 2023.

The reduced Fringe Benefit Tax rate calculated under Section 12B of the Income Tax Act applies to employment-related loans provided to employees at rates below the prevailing market interest rate.

Similarly, the Deemed Interest Rate, which is used for calculating tax on interest free or low interest loans extended to company directors, partners, or related parties, has also been adjusted to 9 percent,in accordance with Section 16(2)(ja) of the Income Tax Act.

KRA further clarified that a withholding tax of 15 percent on the deemed interest must be deducted and remitted to the Commissioner within five working days.

This move is expected to ease the tax burden on employers and encourage more favorable lending terms within companies.

The new rates align with the broader monetary policy aimed at stimulating economic growth by reducing the cost of credit.

Taxpayers are also reminded of the ongoing tax amnesty campaign, with KRA urging eligible Kenyans to apply and regularize their tax affairs.