New Tax Laws in Kenya: How the 2024 Amendments Reshape Investment and Compliance

Updated 19 October 2026

Kenya’s tax rules changed in a big way at the end of 2024. After the Finance Bill, 2024 was withdrawn following the June 2024 protests, the government brought back a slimmer package through two new laws: the Tax Laws (Amendment) Act, 2024 and the Tax Procedures (Amendment) Act, 2024. President William Ruto signed both on 11 December 2024, and they took effect on 27 December 2024.

This guide explains what changed for employees, investors, businesses and foreign digital companies, and what you need to do to stay compliant. Figures are in Kenya shillings (KSh) and come from the Kenya Revenue Authority (KRA) public notice on PAYE and the tax alerts published by KPMG Kenya and PKF Kenya.

In this guide

1. Why the 2024 Amendments Matter
2. Changes for Employees and PAYE
3. Changes for Pensions and Retirement Savings
4. Changes for Investors
5. Significant Economic Presence Tax Replaces Digital Service Tax
6. Minimum Top-Up Tax for Multinationals
7. VAT, Excise and Import Levy Changes
8. Compliance Changes Under the Tax Procedures (Amendment) Act
9. What You Should Do Now
10. Frequently asked questions

Why the 2024 Amendments Matter

The Finance Bill, 2024 was meant to raise new revenue from 1 July 2024. When it was dropped, the Treasury still needed money, and it still wanted to tidy up several parts of the Income Tax Act, the VAT Act, the Excise Duty Act and the Miscellaneous Fees and Levies Act. KPMG Kenya describes the new Act as a second attempt: it drops some proposals the public rejected, brings back others and adds a few new ones. The overall aim is a wider tax base and rules that fit the digital economy and the global minimum tax push led by the OECD.

Changes for Employees and PAYE

For most salaried Kenyans, the biggest shift is that several reliefs became deductions. A relief reduces the tax you pay by a percentage of a contribution. A deduction is taken off your gross pay before tax is calculated, which is usually worth more to middle and high earners. KRA’s notice says the following now come off taxable pay from December 2024:

• Pension contributions to a registered pension or provident fund or individual retirement fund, up to KSh 360,000 a year (KSh 30,000 a month). The old cap was KSh 240,000 a year.
• Mortgage interest on a home loan from a qualifying lender, up to KSh 360,000 a year (KSh 30,000 a month), up from KSh 300,000.
• SHIF contributions of 2.75% of gross salary.
• Post-retirement medical fund contributions, up to KSh 15,000 a month.
• Affordable Housing Levy deductions.

In return, the affordable housing relief (15% of contributions, capped at KSh 108,000 a year) and the post-retirement medical fund relief were scrapped. Insurance relief of 15% on life, education and health policies stays, but it no longer applies to SHIF.

Tax-free benefit limits also went up. Meals provided by an employer are now tax-free up to KSh 60,000 a year (KSh 5,000 a month), up from KSh 48,000. Non-cash benefits are tax-free if their total value is below KSh 60,000 a year, up from KSh 36,000. Gratuity of up to KSh 360,000 for each year of service paid into a registered pension scheme is also excluded from taxable pay.

You can see what these deductions do to your own salary with our PAYE calculator, and check the levy rules in our Affordable Housing Levy guide and SHIF calculator.

Changes for Pensions and Retirement Savings

The Act made retirement money more attractive to save. Income from registered pension funds, provident funds, individual retirement funds, public pension schemes and NSSF is now exempt from income tax for members who have reached the retirement age set by their scheme’s rules. Withdrawals made early because of ill health, and withdrawals after 20 years of membership regardless of age, are also exempt. Before the change, the membership period was 15 years.

If you withdraw before 20 years of membership, withholding tax still applies at graduated rates: 10% on the first KSh 288,000, 25% on the next KSh 100,000 and 30% above KSh 388,000, according to PKF Kenya. Retirement funds must also now be registered with the Retirement Benefits Authority to give members these tax benefits. Our guide to pension withdrawal rules when you leave a job explains how this plays out in practice.

Changes for Investors

Several changes target investment directly:

• Lower threshold for investment deduction. Investors who put at least KSh 1 billion (down from KSh 2 billion) into hotel buildings, manufacturing buildings or machinery outside Nairobi City and Mombasa counties over the preceding three years qualify for an investment deduction of 100%, and in some cases 150%.
• 5% capital gains tax for big NIFC investments. A preferential capital gains tax rate of 5% applies where the Nairobi International Financial Centre Authority certifies that a firm invested at least KSh 3 billion in a Kenyan entity within two years and sells the investment after at least five years.
• Family trusts. Income received from a registered family trust is now taxable, reversing part of the exemption introduced in 2021.
• Software is a royalty. Payments for the use of software, whether off the shelf or custom, now fall under the definition of royalty, so withholding tax applies to them.

Significant Economic Presence Tax Replaces Digital Service Tax

The 1.5% Digital Service Tax was repealed and replaced with a Significant Economic Presence (SEP) Tax. It applies to non-resident companies without a permanent establishment in Kenya that earn income from services provided to Kenyan users over a digital marketplace. Their taxable profit is deemed to be 10% of gross turnover, taxed at 30%, which works out to an effective 3% of turnover.

SEP Tax does not apply to non-residents with annual turnover below KSh 5 million, those operating through a permanent establishment, telecom transmission businesses, or income such as royalties, interest and professional fees already covered by withholding tax. Affected companies must file and pay by the 20th day of the month after the service is provided.

Minimum Top-Up Tax for Multinationals

The Act also brings in a minimum top-up tax. Large multinational groups whose combined effective tax rate in Kenya falls below 15% must pay the difference. This follows the OECD’s global minimum tax framework. Public entities, pension funds, non-profits, sovereign wealth funds and certain investment funds are excluded.

VAT, Excise and Import Levy Changes

On VAT, the 90/10 rule that let businesses with mixed taxable and exempt supplies claim input VAT in full has been removed, so input tax must now be apportioned. Businesses stuck with excess input VAT after a supply became zero-rated or exempt from July 2022 could apply for relief within six months.

Excise duty rose on several items. The rate on betting, gaming, prize competitions and lotteries went up from 12.5% to 15%. Imported sugar confectionery doubled to KSh 85.82 per kg, cigarettes moved to KSh 4,100 per mille, and liquid nicotine went up to KSh 100 per millilitre. Alcoholic drinks are now taxed by alcohol content, with a lower rate of KSh 10 per centilitre of pure alcohol for small independent brewers. A new 15% excise duty applies to internet and social media adverts for alcohol, betting and gaming, and non-resident digital platforms selling excisable services must now charge excise duty to Kenyan customers. Fees charged by CBK-licensed digital lenders are also clearly brought into the excise net.

For importers, the Railway Development Levy rose from 1.5% to 2% of customs value, which adds to the landed cost of most imported goods.

Compliance Changes Under the Tax Procedures (Amendment) Act

The tax amnesty on penalties and interest for tax periods up to 31 December 2023 was extended to 30 June 2025, on condition that the principal tax was paid in full. Suppliers to public entities also face new withholding tax: 0.5% for resident suppliers of goods and 5% for non-resident suppliers, deducted from payments by ministries, state corporations and county departments.

What You Should Do Now

1. Check your payslip. Your SHIF, housing levy and pension contributions should be deducted before PAYE is worked out. If they are not, ask your payroll team.
2. Review pension contributions. You can now put up to KSh 30,000 a month into a registered scheme tax-free.
3. Keep mortgage documents. Lender statements support the higher mortgage interest deduction.
4. Update supplier and invoicing systems. Businesses dealing with software, public entities or imports should update withholding tax and cost calculations.
5. Watch later Finance Acts. Some rules have since been adjusted. For example, PwC notes that the Finance Act, 2025 extended the mortgage interest deduction to money used to construct a home.

Payroll and tax compliance staff are in demand as these rules keep changing. You can find current openings on JobinKenya.

Frequently asked questions

When did the Tax Laws (Amendment) Act, 2024 take effect?

It was signed on 11 December 2024 and took effect on 27 December 2024, so it applied to PAYE from the December 2024 payroll.

Is SHIF deductible from taxable income in Kenya?

Yes. SHIF contributions of 2.75% of gross salary are deducted before PAYE is calculated. Insurance relief no longer applies to SHIF.

How much pension contribution is tax-free in Kenya?

Up to KSh 30,000 a month (KSh 360,000 a year) paid into a registered pension, provident or individual retirement fund.

What replaced the Digital Service Tax?

The Significant Economic Presence Tax, which taxes non-resident digital service providers at an effective 3% of gross turnover.