Finance Bill 2026 ends KQ tax relief, widens digital tax net
At the centre of the proposed changes is an amendment to Section 35 of the Income Tax Act that would delete Paragraph 1(lii), ending a withholding tax exemption previously granted to the national carrier on payments to non-resident service providers offering specialised technical..
✨ Key Highlights
Kenya's proposed Finance Bill 2026 is set to end tax relief for Kenya Airways (KQ) and significantly expand the digital tax net.
- The bill proposes ending the withholding tax exemption for Kenya Airways on payments made to non-resident service providers.
- Key organizations like Kenya Airways, payment processors, software firms, and banks will be impacted by broader definitions of "management or professional fee" and "royalty."
- The proposed changes aim to increase government revenue collection across strategic sectors including aviation, fintech, software, and commerce.
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Sh1.3trn of Kenya's Sh4.8trn Budget Goes to Debt Repayment - May 2026
Kenya's Sh4.8 trillion budget for fiscal year 2026/27 faces significant strain, with Sh1.3 trillion allocated to debt repayment, impacting development spending. An audit by Auditor-General Nancy Gathungu revealed that the National Treasury illegally diverted Sh30 billion in Eurobond proceeds to cover domestic debt shortfalls, violating the bond's subscription agreement. The proposed Finance Bill 2026 is set to end tax relief for Kenya Airways and significantly expand the digital tax net. Separately, the Kenyan government proposed a new 5 percent tax on imported second-hand clothing, known as mitumba, under the draft Finance Bill 2026.
