Tax Trends & Emerging Issues
A practical review of the tax administration, customs, filing, rates and case-law developments businesses need to understand this quarter.
A Quarter of Fast-Moving Tax Administration Changes
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.
eTIMS Buyer-Initiated (Reverse) Invoicing
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.
Buyer initiates the reverse invoice via USSD *222#
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.
Supplier acknowledgement, 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.
Buyers can now stay eTIMS-compliant even when suppliers aren't
2026 Tax Amnesty Programme
KRA has reopened a Tax Amnesty Programme running 1 July to 31 December 2026, covering qualifying tax debts accrued up to 31 December 2025.
100% Penalty Waiver
Eligible businesses receive a full waiver of penalties, interest and fines on qualifying historical debt.
Principal Must Be Settled
Where principal tax remains outstanding, it must be paid within the amnesty period.
Payment Plans Allowed
Taxpayers unable to pay immediately may enter an approved payment plan, but principal must be cleared by 31 December 2026.
Cut-Off Date Matters
Liabilities arising from 1 January 2026 onward are excluded — this is relief for old debt only.
KRA Launches the Advance Cargo Declaration (ACD) Platform
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.
Business Implications
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.
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.
Suit Against the New KRA Cargo System
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.
Petitioners question whether the ACD platform was lawfully procured
- They argue KRA has not disclosed procurement records, tender documents, contract awards, statutory approvals, or the contractual arrangements behind the system.
- The petitioners claim there is no public evidence the platform was acquired through an open, competitive and lawful procurement process, as required under public procurement rules.
Uncertainty for importers, agents and manufacturers
Filing Deadlines, eTIMS & VAT Data Integration
Income Tax Filing Deadline Moves to April
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.
Individuals, sole proprietors and professionals need to start earlier
eTIMS Becomes Central to Income Tax Compliance
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.
Bookkeeping and eTIMS compliance can no longer be treated as separate processes
Export Data Now Integrated With VAT Returns
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.
- Exporters must correctly capture their KRA PIN and TIMS/eTIMS zero-rated invoice number during customs documentation.
- Exporters can no longer rely solely on manually entered figures when declaring zero-rated exports — the system now checks against Customs data directly.
KRA Maintains 8% Fringe Benefit & Deemed Interest Rates
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.
What Is Fringe Benefit Tax?
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 — The Bigger Risk for Foreign-Funded Companies
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.
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.
Sybrin Kenya Ltd v Commissioner of Domestic Taxes
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.
KRA Issues Additional VAT Assessment
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 IssuedTribunal Rules in Favour of Sybrin Kenya
The 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.
Win for Sybrin KenyaKRA’s Appeal Succeeds
The High Court found 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 KenyaCourt of Appeal Restores the Tribunal’s Position
The Court of Appeal agreed with Sybrin Kenya, 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 KenyaThe \u201cultimate consumer\u201d test just got clearer — but stay alert
What Businesses Should Do Now
A practical checklist to work through with your finance and compliance team this quarter:
- ✓Take advantage of the 2026 Tax Amnesty where applicable, before it closes on 31 December 2026.
- ✓Prepare individuals and sole proprietors for the earlier April 2027 filing deadline.
- ✓Ensure purchases and expenses are properly supported through eTIMS — not just sales.
- ✓Reconcile eTIMS sales with VAT, income tax and accounting records regularly, not just at filing time.
- ✓Match Customs/import/export declarations with accounting and VAT records to avoid mismatches under the new iCMS–iTax integration.
- ✓Review KRA’s pre-populated information carefully before accepting it — don’t assume it’s correct by default.
- ✓Maintain proper documentation to explain any differences in KRA’s third-party data.
- ✓Treat tax compliance as a continuous, year-round process — not a June (or now, April) filing exercise.
Have Questions About These Changes?
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.