Finance Act 2026: changes for Kenyan businesses

What KRA says the Finance Act 2026 changes for Kenyan businesses, from gratuity and VAT to the amnesty and import records, and when each change starts.

By Achekam · 11 October 2026 · 4 min read · For Running a business businesses in Kenya

Every Kenyan Finance Act brings a mix of changes, some headline-grabbing and some that only show up months later in a payroll calculation or a VAT return. The Finance Act 2026 is no different. For a business owner, the useful questions are simple: what changed, which parts touch my business, and from when?

This article works through the changes KRA highlights in its own summary, grouped by the part of the business they affect. It is a map, not a substitute for advice on your own position, and KRA's page remains the place to check the detail at the time of writing.

Three commencement dates

KRA says the Finance Act 2026 changes do not all start at once:

That staggering matters. A change effective in July already applies to payroll and VAT for the second half of 2026, while the new filing timelines do not bite until 2027.

KRA's own summary, Finance Act 2026: what it means for you, lists the changes and their start dates, and is the page to return to when a question comes up.

Payroll: the new gratuity conditions

KRA says that under the Finance Act 2026, gratuity qualifies for tax exemption only if:

• the contract of service is for at least three continuous years, or is an extension of a three-year contract; and
• the gratuity does not exceed 31% of the emoluments earned in that period.

Older KRA PAYE pages describe a different gratuity exemption, of up to Kshs 360,000 per year of service. The Finance Act 2026 summary is the newer statement. An employer paying contract gratuities should check each contract against the new conditions. The detail is in gratuity and tax after the Finance Act 2026.

VAT: bad debts, invoices and payment fees

Three VAT points stand out in KRA's summary.

Bad debts. KRA says the Act extends the period for claiming a VAT refund on bad debts from two years to three years. A business that has written off customer debts on which it paid output VAT has longer to recover that VAT.

Invoices showing VAT. KRA says an invoice showing VAT should only be issued for a taxable supply. Exempt and out-of-scope sales should not carry VAT on the invoice, which is worth checking in your invoice templates.

Payment service fees. KRA says fees charged by payment service providers for digital payment services, including payment processing, settlement, merchant acquiring, gateway and aggregation services, are not exempt from VAT. A business that takes card or mobile-money payments should expect VAT on those fees.

In Achekam, payouts from each payment gateway, including M-Pesa, are recorded against that gateway's clearing account together with its fees. Recording the fees separately, rather than netting them off sales, keeps them visible when you look at the VAT on them.

Filing timelines from 2027

From 1 January 2027, according to KRA, the deadline for individuals moves earlier. Individual taxpayers, and here KRA includes the self-employed and partnerships, will have four months from the end of the year of income: for an individual, that is 30 April. Companies keep the deadline they have now, six months after their own year-end.

For a sole proprietor or a partnership, that brings the return forward. Plan the year-end bookkeeping accordingly.

The amnesty on penalties and interest

As KRA describes it, the amnesty waives penalties, interest and fines on tax that fell due on or before 31 December 2025. The price of that relief is clearing the principal, the tax itself, by 31 December 2026, and other conditions apply. The principal is never waived.

For a business with old arrears, this is a window with a closing date. The conditions and how to use it are covered in the 2026 tax amnesty.

Import documentation

From 1 September 2026, KRA says, each import needs paperwork from the country it was exported from: an export declaration or export entry, a customs export certificate, or an equivalent. The importer has to hold on to it for five years or more. Without satisfactory paperwork, KRA cautions, claims about the goods' value, origin or ownership, and claims to exemptions, deductions or refunds, may be affected. The practical steps are in export documents importers must now keep.

How Achekam brings in new rules

Tax changes raise a fair question about any accounting system: when does it start using the new figures? Achekam's approach is cautious by design. Each Kenyan tax figure entered its rule book marked as under review. Until an Achekam platform administrator approves a figure, nothing is computed from it, and users in a workspace have no way to change a rate themselves.

Start dates are handled the same way. Kenyan rules whose start date the research did not find begin on 1 January 2026 in Achekam, so earlier Kenyan periods are refused rather than computed. A computation either uses an approved rule for the right period or does not run.

A short action list

1. Review contracts that promise gratuity against the new conditions.
2. Check that only taxable supplies carry VAT on your invoices.
3. Expect VAT on payment provider fees and record them separately.
4. Diary the earlier individual filing date if you file as an individual or partnership.
5. Decide whether the amnesty applies to any old arrears, before its deadline.
6. Brief whoever handles imports on the export documents now required.

Take the list to your next management meeting and give each item an owner. Most of these changes are already in force.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.