The Kenya Revenue Authority (KRA) has raised the interest rates used to calculate Fringe Benefit Tax and deemed interest to 9 per cent for October to December 2026, up from 8 per cent in the previous quarter.
KRA on Thursday, October, 22, said employers and businesses affected by the two taxes must use the new 9 per cent rates when calculating their tax obligations for October, November and December 2026.
"We wish to inform taxpayers that the Fringe Benefit Tax Market Interest Rate and the Deemed Interest Rate have both been set at 9 per cent for October, November and December 2026," the taxman said.
Fringe Benefit Tax applies when an employer gives an employee a loan at below-market interest rates, with the tax calculated on the benefit the employee receives from the cheaper loan.
An undated image of the KRA entrance
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KRA
On the other hand, deemed interest applies when a company gives an interest-free loan or advance to its shareholder or someone connected to them, under circumstances covered by tax law.
In addition to the two rates, KRA told businesses and employers that a 15 per cent withholding tax on deemed interest would apply for the aforementioned period.
"For deemed interest, a 15 per cent withholding tax applies. Employers, businesses and other affected taxpayers are encouraged to take note of these rates and ensure compliance," KRA stated.
The two taxes are governed by the Income Tax Act, which sets out how employers and businesses should pay tax on benefits arising from certain loans given to their employees.
According to the law, in a special case where the tenure of the loan extends beyond the date of the termination of employment, the new rates will still be applicable.
Employers are therefore required to deduct this tax and remit the funds to the Commissioner within five working days, in line with existing tax regulations.
The update is part of KRA’s routine quarterly review of market interest rates used in tax computations, intended to reflect prevailing economic conditions and ensure fairness.
Nonetheless, the authority did not explain why it raised the rates from 8 per cent to 9 per cent, but the change could reflect the ongoing adjustments in tax administration in the country.
Kenya Revenue Authority building at Times Towers
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