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Understanding the Impact of Kenya’s Finance Act 2025

The Finance Act 2025 Kenya, assented into law on 27th June 2025, ⁠ introduces wide-rangings ammendments across the tax spectrum,including IncomeTax, Value Added Tax (VAT), Excise Duty, and Tax⁠ Procedures. While Non-Governmental Orgainnations (NGOs) are traditionally nonprofit and often benefit from tax exemptions, the reallaity is that this new law directly influences how NGOs operate, spend, report, and comply. At SGCL Consulting, we have broken down the key provisions of the Finance Act 2025 and analyzed their implications for NGO boards,CEOs, program directors, and finance managers. In addition, we explore other emerging compliance issues that, though not introduced by⁠ the Act, are increasingly criticall to effective NGO governance in Kenya.

1. Finance Act 2025: :

Key Changes Affecting NGOs Payroll and Staff-Related Taxes. Section 37 now requires employers to aply all relevant tax reliefs, exemptions, and didauctions when computing employee taxable income. This includes:

• Pension contributions
• Affordable Housing Levy
• Social Health Authority (SHA) contributions
• Mortgage repayments
• Disability related exemptions (first KES 150,000 tax-free income)

What This Means for NGOs:

• Payroll systems must be regularled, updated to apply correct deductions and exemptions.
• Employees must submit supporting documentations (e.g., pension contribution certificates, mortgage interest certificates, KRA disability exemption certificate).
• Failure to capture this may lead to overpayment of taxes, which are not easily refundable.

Recommended Actions:

• Train HR and Finance teams on the new payroll⁠ tax rules.
• Sensitize employees to provide required documentation early.

2. Increase in Allowable Per-Diem.

The allowab⁠le daily per-diem has been increasesed from KES 2,000 to KES 10,000 for subsistence, travel, entertainment, and other duty-related allowances.

Implication for NGOs:

• Payroll and reimbursement systems must reflect the new statutory threshold.
• Any per-⁠diem above KES 10, ⁠000 must be supported by receipts or will be taxable.

Recommended Actions:

• Update payroll systems with new thresholds.
• Train HR and Finance teams on proper per-diem processsing.
• Communicate⁠ new rules clearly to employees.

3. VAT Claw back on exempt and Zero-Rated Goods.

A new VA⁠T provision requires tax payment where exempted or zero-rated goods are later used fo rpurposes inconsistent with the exemption granted.

Implication for NGOs:

• Goods/services acquired under exemption must be used strictly for their approved program purposes.
• Misuse may trigger unexpected VA⁠T liabilities , straining dono⁠r-funded budgets.

Recommended A⁠ct⁠ions

• Conduct an inventory audit linking exempt items to project budgets.
• Train procurement and finance staff on exemption compliance..
• Engage donors early to renegotiate the VAT-inclusive budgets.
• Implement internal controls to track usage of exempted goods.

Other Emergeing Issues for NGOs in Kenya.

1.⁠ Grant Agreements, Contracts, and Compliance Risk.

The Kenya Revenue Authority (KRA) has adopted a more aggressive stance in reviewing NGO operations. Risks include:

• Back taxes for payroll or income not covered by valid exemptions.
• Project implementation delays as funds are diverted to pay taxes.
• Donor⁠ confidence erosion due to non-compliance.

Recommended Actionsns:

• Review grant agreements⁠ and MoUs with tax implications in mind.
• Involve tax and legal advisors in project structuring.
• Update the 14 finance and operations manuals to align with KRA compliance expectactions.

2. Taxation of Income from Non⁠-Core Activities.

Income from noncore or commercial activities (training, consultancy, rentals, or social enterprise ventures) is taxable by default unless covered⁠ by a valid exemption certificate.

What NGOs Must Do?.

• Ring-fence non-core income separately from donor-f⁠unded Income.
• Apply for⁠ a specific KRA exemption where applicable.
• Consider setting up a Special Purpose Vehicle (SPV) for large-scale commercial operations.
• Seek advance tax rulings to clarify treatment and reduce disputes.

3. Public Benefit Organizations (P⁠BOs)– Legal Updates.

Extension of⁠ transition deadline: Gazette Notice No. 62⁠55 (16 May 2025) extended the transition deadline under the PBO Act to 13th May 2026. High Court ruling (June 2025): Declared that NGOs registered under the repealed NGO Coordination Act are automatically recognized as PBOs. Mandatory re-registration and forced membership in the PBO Federation were declared unconstitutional.

Implications:

• Legal continuity for NGOs is safeguarded.
• Compliance requirements under the PBO Act remain, though implementation guidance from the Ministry of Interior is pending.
• Our Final Thought: NGOs Must Be Proactive.
• Although NG⁠Os are not the primary target of the Finance Act 2025 Kenya, the ripple effects are clear. Donors, auditors, and regulators will expect higher accountability for how funds interact with tax laws.

Now is the time to:

• Reassess your operating model.
• Tighten governance and compliance structures.
• Partner with professtonal advisors for ongoing guidance.

How SGC Limited Can Help NGOs.

At SGC Limited, we support NGOs in Kenya⁠ through:

• Tax compliance and exemption reviews.
• NGO tax health checks.
• Financial systems and internall controll reviews.
• Staff training on donor-aligned tax and compliance requirements.
• Odoo ERP implementation for project management, pay⁠rol⁠l, procurement, accounting, and donor reporting.

Contact us at info@sgcl.co.ke or visit www.sgcl.co.ke to book a consultation.

Disclaimer

This article is for genreal inform⁠ational purposes only and does not constitute legal, tax, or regulatory advice. For tailored guidance, please consult your legal counsel or contact SGC Limited directly.

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Tax Compliance: A Smart Way to Secure Wealth Now and for the Future

Tax compliance is not just a legal obligation it is also a wealth protection strategy. Whether you’re a growing entrepreneur, a seasoned business owner, or a family looking to preserve your legacy, understanding and adhering to tax laws is one of the most strategic steps you can take to secure your financial well being in the short term, long term, and across generations. Short-Term Wealth Security: Avoiding Costly Penalties. Tax non-compliance can quickly eat into your cash flows through penalties, interest, and reputational risks.

Example:

A small manufacturing business fails to file and remit PAYE on time for three consecutive years. The result? The Revenue Authority imposes a late filing penalty of 25% of the tax due or KES 10,000 whichever is the higher, a late payment penalty of 5% on the tax due, plus 1% interest per month on any amount still outstanding. This unexpected expense can force the business to delay in key investment strategies like equipment upgrade, funding for new markets and expansion.

Lesson:

Simple practices like timely filing of returns and accurate record keeping can help you avoid such costs and reinvest your savings into business growth. Long-Term Wealth Protection: Building Credibility and Growth Capacity. Tax compliance helps position your business for future growth, funding, and partnerships.

Example:

A mid-sized tech company, compliant with all its tax obligations, secures a major grant from an international Organization . One of the deciding factor was their clean tax compliance status, audited financials, and transparent reporting.

Lesson:

A compliant tax position strengthens your balance sheet, increases investor confidence, and opens doors to opportunities that non-compliant competitors may not access. Succession Planning: Protecting the Next Generation. Whether you’re passing on a family business, rental income, or agricultural land, tax planning is key to successful wealth transfer.

Example:

Say a family has built a strong property portfolio over 2 to 5 decades. Before passing assets to the next generation, they work with a tax advisor to carry out a tax health check and implement the tax health check findings to restructure their holdings, pay outstanding tax liabilities, take advantage of any tax amnesty and ensure clean title transfers. Their heirs would then enjoy a steady income stream without going through difficult tax conversation/legal wrangles with the tax authority.

Lesson:

Transparent, tax-compliant succession structures protect beneficiaries from disputes, audits, or unexpected tax bills ensuring your legacy lives on. Our Commitment at SGCL. As a trusted second-tier CPA firm with deep local knowledge and technical expertise, SGCL Consulting walks with you through every stage of your tax journey.

We offer:

• Tax health checks.
• Filing and advisory services.
• Succession and estate planning support.
• Representation in tax disputes.
• Training and compliance audits.

Let us help you move from reactive tax filing to proactive wealth protection because true financial freedom starts with compliance.

Reach out at Email:info@sgcl.co.ke or Visit: www.sgcl.co.ke

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Tax Compliance: The Cornerstone of General Wealth Management

In the realm of wealth creation, few elements are as fundamental and underestimated as tax compliance. While investing, entrepreneurship, and asset acquisition dominate headlines, the true bedrock of lasting prosperity lies in ensuring that your wealth is not only accumulated but also preserved, protected, and easily passed on. Generational wealth management without tax compliance is a strategy doomed to collapse under scrutiny.

Why Tax Compliance is a Non-Negotiable in Succession Planning?

When planning for generational wealth transfer, many families focus on trusts, wills, and estate plans, often neglecting the crucial role that tax compliance plays. Yet, it is compliance that turns a well crafted succession plan into a reality.

You Cannot Transfer What Is Not Clean.

Unresolved tax obligations can cripple a succession plan. If properties have outdated documentation or unpaid taxes, they become liabilities, not legacies. Heirs may face asset freezes, audits, and legal disputes, eroding the very wealth you intended to pass on. By contrast, clean tax records ensure that every asset is traceable, declarable, and transferable.

Asset Preservation Through Compliance.

Every year that tax matters are ignored is a year in which capital gains taxes (CGT), stamp duties, and undeclared income penalties compound. Future tax rates are uncertain and may be less favorable than today’s. Paying taxes at current rates locks in asset value, shielding your estate from future fiscal tightening.

Protect the Net Worth of Your Estate.

Consider this: an estate worth $5 million today with 20% exposure due to non-compliance could lose $1 million to penalties and back taxes. That’s money your heirs will never see. Clean up now to maximize the wealth your family actually receives.

Strategic Tax Planning Begins with Compliance.

You may want to form a family trust, set up a holding company, or gift shares to your children. But these strategies only work when your financial house is in order. Tax authorities demand documentation, clean audits, and proof of ownership. Without them, your wealth is vulnerable.

Compliance Enables Proactive Wealth Structuring.

• Family Trusts: Avoid probate and ensure tax efficiency but only with cleanly declared assets.
• Gifting & Share Transfers: Requires tax clearance certificates and audited accounts.
• Holding Companies: Ideal for centralizing wealth—but only if the source assets are compliant.

In short, non-compliant wealth is ineligible for strategic structuring. Do it right, and your tax-efficient legacy becomes a fortress. Ignore it, and it becomes a ticking time bomb. Shielding Future Generations from Financial Landmines. Every frozen bank account or litigated property starts with a past compliance failure. When a loved one passes, families are often shocked to learn that behind the luxury real estate and thriving business lies a web of unresolved tax issues.

Give Your Family Peace, Not Problems.

By staying tax-compliant, you ensure that your family inherits wealth—not lawsuits, debts, or tax investigations. It also accelerates probate and unlocks liquidity faster, allowing your beneficiaries to access funds when they most need them. Future-Proofing Your Wealth Amid Evolving Tax Laws Tax regulations are in constant flux. New governments, economic downturns, or fiscal crises often trigger sweeping reforms. Being compliant today ensures you’re not caught unprepared tomorrow.

Benefits of Proactive Compliance.

• Secure Today’s Tax Advantages: Rates and exemptions in place today may not exist in 10 years.
• Enable Agile Planning: With a clean slate, you can pivot your estate plan without fear.
• Minimize Legal Exposure: Audits are simpler when records are already transparent.

A future-ready estate starts with a tax strategy that’s as dynamic as the laws it must follow.

Common Tax Compliance Pitfalls to Avoid.

Even well-meaning wealth builders can fall into traps that compromise their compliance standing:

• Undeclared Income: From rental properties or side businesses.
• Improperly Documented Gifts: Leading to audit flags.
• Unregistered Assets: Especially in foreign jurisdictions.
• Neglected Corporate Filings: In family-owned businesses.

Avoid these by conducting regular tax audits, using qualified tax advisors, and embracing full transparency.

Why Tax Compliance is the Foundation of Legacy.

At its core, your legacy is about continuity. It’s not just what you create, but what endures. A compliant tax record is a gift in itself one that spares your heirs emotional stress, financial hardship, and legal battles. It’s the unseen hero of every successful generational wealth story.

How SGCL Consulting Helps You Build Compliant, Transferable Wealth.

At SGCL Consulting, we specialize in aligning your financial strategy with comprehensive tax compliance. Whether you’re building a family building, planning a trust, or simply need to audit your portfolio’s readiness for succession, our experts ensure that your assets are transparent, protected, and poised for transition.

We work hand-in-hand with our clients to:

• Conduct full tax health checks.
• Monthly, annual and other routine tax filling and compliance services.
• Structure tax-efficient succession vehicles.
• Tax planning and advisory.
• Prepare for audits and obtain clearance certificates.
• Navigate evolving tax landscapes with agility.
• Transfer pricing policies of transfer policies review.

Reach out at Email:info@sgcl.co.ke or Visit: www.sgcl.co.ke

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Common tax mistakes organizations make (and How to Avoid Them).

Tax compliance is not just a statutory requirement it’s a critical part of sound financial management and business sustainability. However, many organizations, particularly SMEs across Kenya and Africa, continue to fall into avoidable tax traps. Below are six common tax mistakes businesses make and practical strategies to prevent them.

Treating Tax Filing as a Once a Year Event.

Mistake:

Many businesses treat tax filing as a last-minute task, scrambling to meet deadlines. This reactive approach increases the likelihood of errors, omissions, and penalties. It can also trigger red flags with investors and lead to the denial of a Tax Compliance Certificate (TCC).

Solution:

Embed tax planning into your monthly financial operations. Conduct quarterly tax reviews with your accountant, auditor, or tax consultant. Finalize and sign off financial statements early well before tax deadlines. Create a standardized internal tax compliance procedure, assigning ownership and deadlines. Allow at least a 3-month buffer for annual returns and a few days for monthly/quarterly submissions.

Delaying Income Tax and Statutory Deductions.

Mistake:

Some organizations delay or neglect filing PAYE, VAT, Withholding Tax (WHT), and income tax due to cash flow issues or lack of understanding. These delays can result in KRA audits, heavy fines, and reputational damage.

Solution:

• Integrate taxes into monthly cash flow planning.
• Schedule routine tax clinics with your CPA or tax advisor.
• Use automated reminders and software to track deadlines.

Relying on One Person for All Tax Responsibilities.

Mistake:

Over-reliance on a single staff member for tax matters is risky. If they leave, make an error, or become unavailable, your compliance is compromised.

Solution:

Cross-train at least two team members on tax processes. Maintain a backup relationship with an outsourced tax consultant.

Running the Business and Tax Books Separately.

Mistake:

When businesses treat tax filing separately from core operations, it leads to disorganized financial data and misaligned tax filings. This is particularly common in SMEs with informal bookkeeping practices.

Solution:

• Use integrated accounting software like QuickBooks, Zoho Books, or Odoo.
• Align tax compliance with monthly performance reviews and KPIs.
• Avoid year-end surprises by keeping your books updated throughout the year.

Ignoring the Cost of Tax Non-Compliance.

Mistake:

Business owners often prioritize sales and expansion, ignoring tax compliance until they receive a demand from the Kenya Revenue Authority (KRA). The result is disrupted cash flow, penalties, and even business closure.

Solution:

• Budget for tax compliance just like any operational cost.
• Conduct quarterly tax health checks and make them part of your finance team’s KPIs.
• Maintain proper documentation to support all filings.

Failing to Update Your Tax Strategy as the Business Grows.

Mistake:

A tax structure that worked when your business was small might not suit your current scale. As businesses grow, their tax obligations and opportunities evolve.

Solution:

• Conduct an annual tax strategy review with your CPA or tax advisor.
• Claim all allowable deductions and explore sector-specific tax incentives.
• Ensure your business structure supports both growth and tax efficiency.

Need Help with Tax Compliance in Kenya?

Our team at SGCL Consult is ready to support you with:

• Tax reviews.
• Tax computations.
• Tax health checks.
• Filing of tax returns.

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What You Need to know about the Significant Economic Presence (SEP) Tax which replaces the Digital Service Tax (DST). Significant Economic Presence Tax (SEPT).

Kenya implemented the Digital Service Tax via the Finance Act 2020, which took effect on January 1, 2021. The Digital Service Tax (DST) applied to income earned or accrued in Kenya from services rendered through a digital marketplace. Initially, it was applicable to both residents and non-residents, but a change made by the Finance Act 2021 excluded residents from the scope of the Digital Service Tax. Consequently, non-resident digital service providers were required to go through a simplified registration process and submit the necessary taxes by the 20th of the month following the month in which the digital service was provided. The tax rate was set at 1.5% of the gross transaction value. Recognizing the importance of aligning with global tax trends, Kenya abolished the Digital Service Tax through the Tax Laws Amendment Act 2024 and replaced it with the Significant Economic Presence Tax (SEPT). This new provision came into effect as from 27th December 2024.

Understanding Significant Economic Presence Tax.

• Similar to Digital Service Tax, Significant Economic Presence is a tax that is applicable to non-resident persons whose income is derived or accrued from the provision of services through a digital marketplace. Unlike Digital Service Tax whose applicable tax rate was at 1.5% of the gross transaction value, Significant Economic Presence will be charged at the rate of 30% on the deemed taxable profit. The Act defines deemed taxable profit to mean 10% of the gross turnover of the non-resident digital service provider. This in essence brings the effective tax rate to 3%. The Act further exempt the following from Significant Economic Presence:
• Non-resident person (s) offering the services through a permanent establishment;
• Non-resident person (s) transmitting messages by cable, radio, optical fibre, television broadcasting, Very Small Aperture Terminal (VSAT), internet, satellite or by any other similar method of communication;
• Non-resident person income subject to withholding tax;
• Non-resident person (s) providing digital services to an airline in which the government of Kenya has at least forty-five percent shareholding; and
• Non-resident person (s) with an annual turnover of less than five million shillings. The due date for filing Significant Economic Presence return and paying the corresponding taxes will be on or before the 20th day of the month following the month in which the service is offered.

Conclusion and Way Forward.

As the country transition from Digital Service Tax to Significant Economic Presence there is a need for affected companies to review the new regulation and ensure compliance so as to avoid penalties and interest.

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Tax Laws Amendment Bill, 2024: What It Means for You

Decoding the Tax Laws Amendment Bill, 2024:

What It Means for You. In an ambitious move to boost economic growth and address the fiscal deficit, the National Treasury has proposed the Tax Laws Amendment Bill, 2024. This Bill introduces sweeping changes aimed at modernizing Kenya’s tax framework, promoting equity, and enhancing revenue collection. From adjustments to digital marketplace taxation to increased allowances for employees, these amendments signal a significant shift in the nation’s fiscal policy. But how will these changes impact businesses and individuals? Let’s break it down.

Income Tax Act Amendments.

The Tax Laws Amendment Bill, 2024 proposes several key changes to the Income Tax Act that will affect individuals, businesses, and multinational corporations. Here’s what you need to know:

Redefinition of Royalties:

The definition of “royalty” has been expanded to include payments for all types of software whether licensed, proprietary, or off-the-shelf. This means withholding tax will now apply to software-related payments, covering development, training, maintenance, and support fees. Implication: Kenyan businesses relying on imported software solutions might face higher costs, potentially affecting SMEs and startups.

Digital Marketplace Expansion:

The definition of a “digital marketplace” now includes ride-hailing, food delivery, freelancing, and professional services platforms. Income earned through these platforms will be taxed if the Bill passes.

Implication:

Freelancers and platform-based workers may experience reduced take-home pay. However, this move aligns Kenya’s tax policies with global trends in digital taxation.

Employee Benefits Exemptions:

The tax-free thresholds for employer-provided benefits are set to increase:

• Meal Benefits: From KES 48,000 to KES 60,000 annually.
• Non-Cash Benefits: From KES 36,000 to KES 60,000 annually.
• Gratuity Payments: From KES 240,000 to KES 360,000 annually.
• Implication: Employees will enjoy higher disposable income, potentially improving quality of life and workplace satisfaction.

Introduction of Significant Economic Presence Tax (SEP):

The SEP tax will replace the Digital Services Tax (DST) and impose a 30% tax on deemed taxable profits for non-resident digital businesses without a permanent establishment in Kenya. Implication: This ensures foreign digital giants contribute to Kenya’s revenue base, though it may affect the cost of digital services locally.

Minimum Top-Up Tax:

Multinational enterprises with consolidated turnover exceeding KES 100 billion and an effective tax rate below 15% will pay a “minimum top-up tax. Implication: Aligns Kenya with the global minimum tax framework, promoting fairness among large multinationals.

Increased Allowable Deductions:

Contributions to the Social Health Insurance Fund (SHIF), Affordable Housing, and post-retirement medical funds (up to KES 15,000 monthly) will now be tax-deductible. Mortgage relief will increase from KES 300,000 to KES 360,000 annually. Implication: These changes are a boon for employees, enhancing their disposable income and encouraging investment in housing and healthcare.

Pension and Provident Fund Contributions:

Deductible contributions to pensions will rise from KES 240,000 to KES 360,000 annually (KES 20,000 to KES 30,000 monthly). Implication: Encourages long-term savings and financial security for retirees.

Repeal of Affordable Housing Relief:

Section 30A, which provided affordable housing relief, will be repealed. Relief will now be addressed under deductible contributions in Section 15. Implication: Simplifies tax provisions while retaining the benefit for housing investments.

Insurance Relief Adjustment:

Contributions to SHIF will now qualify for insurance relief at 15%, capped at KES 5,000 per month. Implication: This change aligns insurance relief with the transition from NHIF to SHIF, ensuring continuity in tax benefits.

Payments Attracting Withholding Tax:

Payments for supplies to public entities and digital platform transactions will attract withholding tax: Public Supplies: 5% for non-residents and 0.5% for residents. Digital Platforms: 20% for non-residents and 5% for residents. Implication: Encourages compliance but may increase costs for public entities and digital platforms.

Tax-Exempt Income Expansion:

Tax-exempt categories will now include:

Pension benefits and gratuity allowances from public pensions upon retirement. Withdrawals from registered pension funds due to ill health or after 20 years of membership. Implication: Offers better financial security for retirees and individuals facing health challenges.

Tax on Interest Income from Infrastructure Bonds:

Interest income from listed infrastructure bonds issued after the Bill’s passage will now attract a 5% tax. Implication: May affect investment attractiveness but aligns with efforts to widen the tax base.

Tax Exemptions for Non-Resident Contractors:

Non-resident contractors, subcontractors, and employees working on projects funded entirely by grants will be exempt from taxes.

Implication:

Facilitates international development projects while maintaining tax fairness.

Changes for Export Processing Zones (EPZ):

Penalties for failing to submit returns will now be handled under the Tax Procedures Act.

Implication:

Simplifies compliance and reduces administrative burdens for EPZ enterprises.

Value Added Tax (VAT) Amendments.

The Tax Laws Amendment Bill, 2024, proposes significant updates to the VAT Act, aimed at streamlining tax administration and ensuring compliance. Below are the key changes: Time of Supply: The definition of the “time of supply” for exported goods will now be based on when a certificate of export (or equivalent document) is issued by Customs. Implication: This ensures that only legitimate exporters benefit from VAT refunds, reducing fraudulent claims.

Input Tax Credit Changes:

The Bill repeals the 90:10 apportionment formula. Previously, taxpayers making at least 90% taxable supplies could claim 100% of input VAT. Under the new rule, input VAT claims will be proportional to taxable vs. total supplies. Implication: Businesses with a mix of taxable and non-taxable supplies may experience reduced VAT recovery, impacting cash flow.

Integration with the East African Community (EAC) Customs Act:

Expands the application of the EAC Customs Management Act to include VAT on exported goods. Implication: Promotes regional harmonization but might require businesses to adjust their compliance processes.

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SGCL Outsourced Finance Professionals in Kenya

From assistant accountants, accountants, finance managers and virtual CFOs. Get the right fit, right when you need it in Kenya and beyond. Every business in Kenya and beyond experiences staffing shifts from team members going on leave to sudden exits or peak season overload. At SGCL Consulting, we provide qualified outsourced finance professionals in Kenya who step into your business seamlessly and immediately, either on-site or remotely. We specialize in providing top-tier accounting services Kenya businesses can rely on. Whether you need an assistant accountant, senior accountant, finance manager, or a virtual CFO Kenya, we tailor our outsourced finance solutions to match your context reliably, professionally, and without the burden of long term recruitment. When to Engage SGCL’s Seconded Finance Staff in Kenya.

We support your business if:

• Your accountant or finance officer is on maternity, annual, or study leave.
• A key finance team member exits unexpectedly.
• Your organisation is going through high transaction periods.
• You want to improve reporting, compliance, or systems.
• You’re growing and need finance expertise but not a full-time hire.

The Finance Talent We Provide in Kenya and Beyond.

Assistant Accountant.

• Handles day-to-day processing and reconciliations. Duties include the following among others.
• Invoicing & payments.
• Bank, debtors & creditors reconciliations.
• Payroll support.
• Data entry & transaction coding.

Senior Accountant.

Provides hands-on financial operations and oversight. Duties include the following among others:

• Supervision of accounts payable/receivable.
• Monthly management accounts.
• Fixed asset register maintenance.
• Tax computations & returns (VAT, PAYE, WHT, Income Tax).

Finance Manager Kenya.

Leads and strengthens your finance department. Duties include the following among others:

• Budgeting & cash flow management.
• Statutory compliance & audit coordination.
• Internal controls implementation.
• Manage audits.
• Staff supervision and training.

Virtual CFO Kenya.

Strategic financial leadership without a full-time salary. Duties include the following among others:

• Financial strategy & board reporting.
• Business model and pricing reviews.
• Investor or fundraising support.
• High-level cash flow planning & growth advisory.

All SGCL staff are trained and supported by our wider advisory and tax teams, giving you deeper assurance and technical backup for your outsourced accounting needs in Kenya and beyond.

Our Process.

• 1. We assess your business needs.
• 2. We recommend the right-level professional.
• 3. We second the staff within 5 working days.
• 4. We monitor and support them throughout the engagement.

Why Work With SGCL for Finance Outsourcing in Kenya and Beyond.

• 15+ years of accounting and finance experience in Kenya.
• Flexible engagements – 1 month to 12+ months.
• Local and global experience.
• Custom-matched professionals from our internal pool.
• Backed by a team of auditors, tax experts & consultants.
• SGCL oversight.

Let’s keep your finance function moving. Whether you’re filling a gap, upgrading your team, or facing a high workload season, SGCL has the people, structure, and experience to help with your outsourced finance solutions in Kenya and beyond.

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Understanding the Impact of Kenya’s Finance Act 2025 on NGOs and other Emerging issues.

The Finance Act 2025 Kenya, assented into law on 27th June 2025, ⁠ introduces wide-ranging amendowments across the tax spectrum,including IncomeTax, Value Added Tax (VAT), Excise Duty, and Tax⁠ Procedures. While Non-Governmental Orgainnations (NGOs) are traditionally nonprofit and often benefit from tax exemptions, the realliability is that this new law directly influences how NGOs operate, spend, report, and comply. At SGCL, we have broken down the key provisions of the Finncue Act 2025 and analyzed theire implications for NGO boards,CEOs, program directors, and finance managers. In addition, we explore other emerging compliance issues that, though not introduced by⁠ thee Act, are increasingly criticall to effective NGO governance in Kenya.

1. Finance Act 2025⁠: Key Changs Affecting NGOs.

Payroll and Staff-Related Taxes:

Section 37 now requires employers to aply allrelevant tax reliefs, exemptions, and didauctions when computing employee taxable income. This includes:

• Pension contributions.
• Affordable⁠ Houstin Levy.
• Social Health Authority (SHA) contributions.
• Mortgagee rpayments.
• Disability related exemptions (first KES 150,000 tax⁠-freed income).

What This Means for NGOs:

• Payroll ssystems must be regularlee updatedto apply correct deductionsand exemptions.
• Employeyes must submitsupporting documentation (e.g., pension contribution certificates, mortgage interest certificates, KRA disability exemption certificates).
• Failure to capture this may lead to overpayment of taxes, which are not easily refundable.

Recommended Actions:

• Train HR and Finance teams on the new payroll⁠ tax rules.
• Sensitize employees to provide required documentation early.

2. Increase in Allowable Per-Diem.

The allowab⁠le daily per-diem has been increasesed from KES 2,000 to KES 10,000 for subsistence, travel, eentertainment, and other duty-related allowances.

Implication for NGOs:

• Payroll and reimbursement systems must reflect the new statutory threshold.
• Any per-⁠diem above KES 10, ⁠000 must be supportedd by receipts or will be taxable.

Recommended Actions:

• Update payroll systems wit⁠h new thresholds.
• Train HR and Finance teams on proper per-diem proc⁠essing.
• Communicate⁠ new rules clearly to employees.

3. VAT Clawback on Exempt and Zero-Rate⁠d Goods.

A new VA⁠T provision requires tax pay⁠ment where exempted or zero-rated goods are later used for purposes incons⁠istent with the exemption granted.

Implication for NGOs:

• Goods/services acquired under exemption must be used strictl⁠y for their approved program purposes.
• Misuse may trigger unexpected VA⁠T liabilities, strai⁠ning dono⁠r-funded budgets.

Recommended A⁠ct⁠ions:

• Condu⁠ct an inventory audit linking exempt items to project budgets.
• Train procurement and finance staff on exemption compliance.
• Engage donor’s early to renegotiate the 14 VAT inclusive budgets.
• Implement internal controls to track usage of exempted goods.

Other Emerging Issues for NGOs in Kenya.

1.⁠ Grant Agreements, Contracts, and Compliance Risk.

• The Kenyam Revenue Authority (KRA) has adopted a more aggressivesetdance in reviewing NGO operations. Risks include:
• Back taxes for payroll or income not covered by validexemptions.
• Project implementnotaction delays as funds are diverted to pay taxes.⁠
• Donorr⁠ confidence erosion due to non-compliance.

Recommended Actions:

• Review grant agreements⁠ and MoUs with tax implications in mind.
• Involve tax and legal advisors in project structuring.
• Update the 14 finance and operations manduals to align with KRA compliance expectactions.

2. Taxation of Income from Non⁠-Core Activities .

Income from noncore or commercial activities (training, consultancy, rentals, or social enterprise ventures) is taxable by default unless coveerred⁠ by a valid eexemption certificate.

What NGOs Must Do?

• Ring-fence non-coree income separately from donor-f⁠unded income.
• Apply for⁠ a specificic KRA exemption where applicable.
• Consider setting up aSpecial Purpose Vehicle (SPV) for large-scale commercial operations.
• Seek advance tax rrulings to clarifyy treatment and reduce disputes.

3. Public Benefit Organizations (P⁠BOs)– Legal Update..

• Extension of⁠ transition deadline: Gazette Notice No. 62⁠55 (16 May 2025) extended the transition deadline under the PBO Act to 13th May 2026.
• High Court ruling (June 2025): Declared that NGOs resisterred under the repealed NGO Coordination Act are ausomatically recognized as PBOs. Mandatory re-registration and forced membership in the PBOFeederaction werue declared unconstitutional.

Implications:

Legal continuity for NGOs is safeguarded. Compliance requiremints under the PBO Act remain, though implementation guidance from the Ministry of Interior is pending. Our Final Thought: NGOs Must Be Proactive Although NG⁠Os are not the primary target of theFinance Act 2025 Kenya, the rigpole effects are clear. Donours, auditors, and rigflator will expect higher accountability for how funds interact with tax laws.

Now is the time to:

• Reassess your operating model.
• Tighten governance and compliance structures.
• Partner with professtonal advisors for ongoing guidance.

How SGCL Consulting Can Help NGOs.

• At SGCL Consulting, we support NGOs in Kenya⁠ through:
• Tax compliance and exemption reviews
• NGO tax health chidecks
• Financial systems and internall contnroll reviews
• Staff training on donor aligned tax and compliance requirements
• Odoo ERP implementation for project management, pay⁠rol⁠l, procurement, accounting, and donor reporting