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+254 728 897 429
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info@rwkafrica.com
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+254 728 897 429
info@rwkafrica.com
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A practical review of the tax administration, customs, filing, rates and case-law developments businesses need to understand this quarter.
Kenya's tax environment continues to move quickly — and August 2026 has brought a cluster of changes that touch nearly every business: how invoices are raised, how cargo clears customs, when returns are due, and how KRA validates what taxpayers declare.
In this briefing, we walk through the most consequential updates from the past few months: KRA's new eTIMS reverse invoicing mechanism, the reopened 2026 Tax Amnesty Programme, the contested rollout of the Advance Cargo Declaration platform, staggered income tax filing deadlines under the Finance Act 2026, updated fringe benefit and deemed interest rates, and a Court of Appeal VAT ruling with real implications for Kenyan companies serving foreign affiliates.
Whether you're closing your books, reviewing supplier contracts, or planning your next shipment, this is what you need to know — and what to do about it.
Reverse invoicing under eTIMS allows a compliant buyer to generate an electronic tax invoice on behalf of a supplier who isn't yet enabled on eTIMS — closing a long-standing gap for businesses that regularly transact with informal or unregistered suppliers.
The buyer generates an eTIMS invoice capturing the supplier's details (name and PIN, if available), the nature of goods or services, the transaction value, and VAT status — VAT is charged only where applicable.
The supplier receives a message notifying them of the initiated invoice and is prompted to approve or decline it, then acknowledges a copy for their own records via the same USSD channel.
If your business regularly purchases from small or informal suppliers, reverse invoicing gives you a compliant way to record the expense without waiting for your supplier to onboard onto eTIMS. Build the USSD step into your procurement routine for any supplier who isn't yet issuing electronic invoices.
KRA has reopened a Tax Amnesty Programme running 1 July to 31 December 2026, covering qualifying tax debts accrued up to 31 December 2025.
Eligible businesses receive a full waiver of penalties, interest and fines on qualifying historical debt.
Where principal tax remains outstanding, it must be paid within the amnesty period.
Taxpayers unable to pay immediately may enter an approved payment plan, but principal must be cleared by 31 December 2026.
Liabilities arising from 1 January 2026 onward are excluded — this is relief for old debt only.
KRA launched the Advance Cargo Declaration Platform on 3 August 2026 for all containerized cargo destined for Kenya. Under the new system, exporters must obtain an ACD Reference Code before shipment, generated after uploading the draft Bill of Lading, commercial invoice, freight invoice, and export declaration. The code must then be endorsed on the Bill of Lading before cargo proceeds to Kenya.
| Stakeholder | Benefits | Challenges |
|---|---|---|
| Importers | Faster customs processing, reduced port delays, greater predictability in cargo clearance, and improved supply chain planning. | Imports cannot proceed without a valid ACD Reference Code; importers become more reliant on exporters and shipping agents to complete documentation before shipment, and any documentation errors may delay loading or clearance. |
| Exporters & Shipping Agents | A structured, predictable pre-shipment compliance process once documentation habits adjust. | Additional pre-shipment compliance requirements; documentation must be prepared much earlier, and incomplete or inaccurate paperwork risks delays. |
The ACD platform's rollout is being challenged in court. The main suit was instituted by three petitioners contesting the platform's procurement, development and implementation on transparency grounds, with KRA and the Public Procurement Regulatory Authority (PPRA) directed to respond. A separate suit has also been filed by technology entrepreneur Jacob Munene, founder of Greenworld Big Data Ltd, alleging that KRA copied his Advanced Cargo Information Declaration system, which he says he presented to KRA in 2023.
For importers, clearing agents, shipping lines and manufacturers, the litigation creates uncertainty around customs documentation, cargo clearance timelines and compliance planning. The core question is whether Kenya's cargo digitalisation process is being implemented with enough transparency, legality and stakeholder confidence — businesses should monitor developments closely before over-committing to new documentation workflows.
The Finance Act 2026 introduced staggered income tax filing deadlines. Natural persons must now file by the end of the fourth month after the year of income, while non-natural persons (including companies) retain the sixth-month deadline. For most individuals with a December year-end, the 2026 income tax return will be due by 30 April 2027, instead of 30 June — companies with a December year-end generally keep the 30 June deadline.
With two fewer months to prepare, books must be closed, income reconciled, and supporting documentation collected much earlier in the year than before.
KRA had granted transitional relief for the 2025 filing cycle, allowing some valid expenses without eTIMS/TIMS invoices to be uploaded for subsequent validation. That relief was specific to 2025. From the 2026 Year of Income onwards, KRA expects declared income and expenses to be supported by valid electronic tax invoices, subject to applicable legal exceptions — and returns are validated against TIMS/eTIMS, withholding tax, and Customs records.
Every expense claimed should have a matching electronic invoice trail. Businesses that have treated eTIMS as a sales-side tool only should extend the same discipline to purchases and expenses.
Effective May 2026, KRA integrated export information from iCMS with VAT returns in iTax. Validated export values are now automatically pre-filled into VAT returns, covering exports to foreign countries, EPZs, SEZs and the Single Customs Territory.
On 14 July 2026, KRA published the applicable interest benchmarks for the current period: the Fringe Benefit Tax market rate and the Deemed Interest Rate both remain at 8% for July–September 2026. Withholding tax on deemed interest remains 15%, payable within five working days of the relevant computation.
Fringe Benefit Tax generally arises where an employer gives an employee, director, or qualifying relative a loan at an interest rate below KRA's market rate. The taxable fringe benefit is essentially the KRA market interest rate minus the interest actually charged by the employer — and the employer is responsible for paying the tax.
Employer loan: KES 3,000,000 | Interest charged: 3% | KRA market rate: 8%
Interest advantage = 5%, meaning a fringe benefit of approximately KES 150,000 annually (roughly KES 12,500 per month) before applying the fringe benefit tax rate.
Deemed interest is different from Fringe Benefit Tax. It becomes particularly important where a Kenyan company receives an interest-free loan from a non-resident, especially within a foreign-controlled group. Kenyan tax law effectively treats qualifying interest-free foreign financing as though interest had been charged using the prescribed rate — courts have described deemed interest as interest calculated using the applicable 91-day Treasury Bill-based benchmark on an outstanding interest-free loan from a non-resident.
A foreign parent provides its Kenyan subsidiary with a KES 100,000,000 interest-free loan. At the current 8% deemed-interest rate, deemed interest is approximately KES 8,000,000 per annum.
The company may then have to account for 15% withholding tax × KES 8,000,000 = KES 1,200,000 — even though it has not actually paid KES 8,000,000 of interest to its parent.
Core dispute: Did software and hardware support services supplied by Sybrin Kenya to its foreign affiliates qualify as exported services for VAT purposes — even though the affiliates ultimately supplied solutions to Kenyan banks?
Sybrin Kenya had been subcontracted by two foreign group companies — Sybrin Systems (Proprietary) Ltd (South Africa) and Sybrin Limited (Guernsey) — which contracted, instructed and paid Sybrin Kenya for specific contributory services. KRA argued that because the software-related services were ultimately used by financial institutions in Kenya, they were not exported services, and issued an additional VAT assessment of KES 40,689,306 following a VAT verification covering January 2016 to December 2019.
Following a VAT verification of Sybrin Kenya covering January 2016–December 2019, KRA assessed additional VAT of KES 40,689,306, arguing the services were ultimately consumed by Kenyan financial institutions.
Assessment IssuedThe TAT found that Sybrin Kenya's services were supplied to its foreign affiliates and fell within the definition of "services exported out of Kenya" under section 2 of the VAT Act — and were therefore not subject to the disputed local VAT. Each party was directed to bear its own costs.
Win for Sybrin KenyaKRA argued the Tribunal had failed to correctly identify the ultimate consumer, and that because Kenyan financial institutions ultimately benefited from the completed solution, the services were consumed in Kenya. The High Court agreed — finding the agreements contemplated customers situated in Kenya, that Kenyan financial institutions were the ultimate beneficiaries, and that the foreign affiliates could not be regarded as the final consumers. The services were held not to qualify as exported services.
Reversed Against Sybrin KenyaSybrin argued the High Court had wrongly focused on the end users of the foreign affiliates' finished product, rather than identifying the consumer of the specific services Sybrin Kenya itself supplied. The Court of Appeal agreed, allowed Sybrin Kenya's appeal, overturned the High Court decision, restored the TAT's 2021 position, confirmed the services qualified as exported services, and defeated the KES 40.69 million VAT assessment.
Final Win for Sybrin KenyaFor Kenyan companies that supply services to foreign affiliates who then serve Kenyan end-customers, this ruling is a meaningful data point: the Court of Appeal focused on who the direct contracting party and consumer of the specific service was, not who eventually benefited downstream. That said, this case took over four years and three tribunals/courts to resolve — businesses structuring cross-border service arrangements should still document contractual relationships carefully and seek advice before relying on exported-services VAT treatment.
A practical checklist to work through with your finance and compliance team this quarter:
Whether it's the ACD platform, the 2026 Tax Amnesty, or how the Sybrin ruling affects your cross-border service arrangements — our team is ready to help you work through the practical implications for your business.