All About Tax and Finance

Understanding the Impact of Kenya's Finance Act 2025

The Finance Act 2025 Kenya, assented into law on 27th June 2025, introduces wide-ranging amendments across the tax spectrum, including Income Tax, Value Added Tax (VAT), Excise Duty, and Tax Procedures.

Key Changes Affecting Payroll and Staff-Related Taxes

Section 37 now requires employers to apply all relevant tax reliefs, exemptions, and deductions when computing employee taxable income. This includes:

• Pension contributions
• Affordable Housing Levy
• Social Health Authority (SHA) contributions
• Mortgage repayments
• Disability related exemptions

Increase in Allowable Per-Diem

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

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.

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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.

Short-Term Wealth Security: Avoiding Costly Penalties

Tax non-compliance can quickly eat into your cash flows through penalties, interest, and reputational risks.

Long-Term Wealth Protection: Building Credibility and Growth Capacity

Tax compliance helps position your business for future growth, funding, and partnerships.

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.

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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.

Why Tax Compliance is a Non-Negotiable in Succession Planning

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.

Strategic Tax Planning Begins with Compliance

Family trusts, gifting & share transfers, holding companies — these strategies only work when your financial house is in order.

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.

Mistake 1: Treating Tax Filing as a Once a Year Event

Solution: Embed tax planning into your monthly financial operations. Conduct quarterly tax reviews.

Mistake 2: Delaying Income Tax and Statutory Deductions

Solution: Integrate taxes into monthly cash flow planning. Schedule routine tax clinics with your advisor.

Mistake 3: Relying on One Person for All Tax Responsibilities

Solution: Cross-train at least two team members on tax processes.

Mistake 4: Running the Business and Tax Books Separately

Solution: Use integrated accounting software like QuickBooks, Zoho Books, or Odoo.

Mistake 5: Ignoring the Cost of Tax Non-Compliance

Solution: Budget for tax compliance just like any operational cost.

Mistake 6: Failing to Update Your Tax Strategy as the Business Grows

Solution: Conduct an annual tax strategy review with your CPA or tax advisor.

What You Need to know about the Significant Economic Presence (SEP) Tax

Kenya implemented the Digital Service Tax via the Finance Act 2020, which took effect on January 1, 2021. 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).

Understanding Significant Economic Presence Tax: SEP is a tax applicable to non-resident persons whose income is derived or accrued from the provision of services through a digital marketplace. The tax rate is 30% on deemed taxable profit (10% of gross turnover = effective 3% rate).

The due date for filing SEP return is on or before the 20th day of the month following the month in which the service is offered.

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

The National Treasury has proposed the Tax Laws Amendment Bill, 2024, introducing sweeping changes to Kenya's tax framework.

Income Tax Act Amendments

• Redefinition of Royalties: Includes payments for all types of software
• Digital Marketplace Expansion: Includes ride-hailing, food delivery, freelancing
• Employee Benefits Exemptions: Meal benefits increased to KES 60,000 annually
• Introduction of SEP Tax: Replaces DST
• Minimum Top-Up Tax: For multinationals with turnover exceeding KES 100 billion

Value Added Tax (VAT) Amendments

• Time of supply for exported goods based on export certificate
• Repeal of 90:10 apportionment formula

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.

When to Engage SGCL's Seconded Finance Staff

• Your accountant or finance officer is on leave
• A key finance team member exits unexpectedly
• High transaction periods
• You want to improve reporting or compliance
• You're growing and need finance expertise

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 throughout the engagement

15+ years of accounting and finance experience in Kenya. Flexible engagements – 1 month to 12+ months.

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

The Finance Act 2025 Kenya introduces wide-ranging amendments across the tax spectrum. While NGOs are traditionally nonprofit, this new law directly influences how NGOs operate, spend, report, and comply.

Key Changes Affecting NGOs

• Payroll and staff-related taxes
• Increase in allowable per-diem to KES 10,000
• VAT clawback on exempt and zero-rated goods

Other Emerging Issues

• Grant agreements and compliance risk
• Taxation of income from non-core activities
• Public Benefit Organizations (PBOs) legal updates

How SGCL Can Help NGOs: Tax compliance reviews, NGO tax health checks, financial systems review, staff training, Odoo ERP implementation.