The Kenya Revenue Authority (KRA) on Monday set the market interest rate for Fringe Benefit Tax and the prescribed rate for Deemed Interest at 8% for the months of October, November, and December 2025, marking the latest quarterly update under the Income Tax Act.
In a public notice issued on Monday, the tax agency said the new rates would apply under Section 12B (Fringe Benefit Tax) and Section 16(2) (ja) (Deemed Interest) of the Act.
The notice, signed by the Commissioner for Micro and Small Taxpayers, further directed that a withholding tax of 15% on the deemed interest be deducted and remitted to the Commissioner within five working days.
The quarterly rate announcement is part of KRA’s ongoing compliance communication meant to help taxpayers, employers, and financial officers adjust their payroll systems, loan benefit calculations, and remittance schedules in line with the prevailing market rates.
Under Kenya’s tax law, Fringe Benefit Tax (FBT) is payable by employers on the difference between the market interest rate and the rate charged on loans granted to employees, directors, or their relatives.
The Deemed Interest rule, on the other hand, applies to loans advanced to a company by non-resident persons, ensuring that interest foregone is treated as taxable income in Kenya.
KRA’s quarterly updates are therefore essential for determining the correct taxable value in both cases, particularly in periods of changing market rates or inflation.
The 8% rate announced for the last quarter of 2025 remains unchanged from the previous quarter, suggesting stable economic conditions.
KRA has also urged taxpayers to use its *USSD code 222# and iTax platform to access services, file returns, and make payments securely.
