Kenya tax rates,
explained plainly.

PAYE & Income Tax Bands

PAYE (Pay As You Earn) is the income tax deducted from an employee's taxable pay and remitted to the KRA by the employer. Kenya applies five progressive tax bands effective since 1 July 2023 (Finance Act 2023), which remain in force for the 2026 payroll year.

PAYE is calculated on taxable income, which is gross pay minus allowable pre-tax deductions (NSSF, SHIF, pension up to 30,000, mortgage interest up to 30,000). The Affordable Housing Levy is deducted from net pay but no longer reduces taxable income — its relief was repealed in December 2024.

Allowable Deductions & Reliefs

Deductions reduce your taxable income before PAYE is calculated. Reliefs reduce the PAYE amount itself after calculation. Mixing them up is the most common source of payslip disputes.

Insurance relief applies to life, health, or education policy premiums: you get 15% of premiums paid credited back, up to KES 5,000 per month. It's claimed after PAYE is computed, just like personal relief.

SHIF — Social Health Insurance Fund

SHIF replaced NHIF on 1 October 2024. Contributions are a flat 2.75% of gross salary, with a minimum of KES 300 per month and no upper cap. Unlike NHIF's stepped bands, everyone pays the same percentage regardless of income.

SHIF reduces taxable income before PAYE is computed, so higher earners see a modest tax benefit relative to NHIF's old fixed maximum.

Affordable Housing Levy (AHL)

The AHL is 1.5% of gross salary deducted from the employee, with the employer contributing a matching 1.5%. Both portions fund the government's affordable housing programme.

Important: AHL relief was repealed in December 2024. This means the levy is still deducted from your take-home, but it does not reduce your taxable income when calculating PAYE. Older payroll tools that still deduct AHL before PAYE will systematically under-compute your tax.

NSSF Tier I & II

Effective February 2026 (Year 4 of the NSSF Act 2013 rollout), contributions apply in two tiers:

• Tier I: 6% of pensionable pay up to KES 9,000 (max contribution: KES 540)
• Tier II: 6% of pensionable pay from KES 9,001 to KES 108,000 (max contribution: KES 5,940)
• Employee total maximum: KES 6,480/month
• Employer matches the employee contribution exactly

NSSF is a pre-tax deduction — it reduces your taxable income before PAYE bands are applied. The employer's matching contribution is not taxable on the employee.

Fringe Benefit Tax (FBT)

When an employer provides a loan to an employee at an interest rate lower than the prescribed market rate, a taxable fringe benefit arises. The employer — not the employee — pays FBT on this benefit at the corporate tax rate of 30%.

For January – June 2026, the prescribed market interest rate is 8%. This is the benchmark against which the employer's rate is compared.

FBT is remitted by the 9th of the following month alongside PAYE.

Deemed Interest Rate (s.16(2)(ja))

When a Kenyan entity receives a loan from a non-resident related party either interest-free or at a rate below the market rate, the KRA "deems" an interest at the prescribed rate. The entity must then pay withholding tax of 15% on that deemed interest.

• Prescribed rate (Q1 2026): 8%
• Withholding tax: 15%
• Payment deadline: within 5 working days of the following month

This provision prevents profit-shifting through artificially cheap intra-group lending from offshore parents.

VAT & eTIMS Compliance

VAT applies to the supply of taxable goods and services. The standard rate is 16%; some petroleum products attract 8%, and essential items like unprocessed food and exports are zero-rated.

eTIMS rules for claiming input VAT:

• You need a valid electronic tax invoice transmitted to KRA.
• The buyer's PIN must appear on the eTIMS invoice — no PIN, no claim.
• Claims must be made within 6 months of the invoice date.
• For imports, input VAT is claimable only if the customs entry status is "Settled" or "Removed".

VAT returns are due by the 20th of the following month, even if no taxable supplies were made (a nil return is still required).

Excise Duty

Excise duty is charged on specific goods and services listed in the Excise Duty Act. Rates are either ad valorem (a percentage of value) or specific (a fixed amount per unit). The lists below reflect rates current for April 2026, as amended by the Finance Act 2025 and the Tax Laws (Amendment) Act 2024.

Ad valorem rates (% of value)

Specific rates (per unit)

Alcohol, tobacco, and petroleum products are taxed per unit rather than as a percentage. The Tax Laws (Amendment) Act 2024 moved alcohol to a per-litre-of-pure-alcohol basis — the higher the ABV, the higher the tax — replacing the old flat per-litre rates. Current reference rates:

Specific rates change annually — always consult the First Schedule of the Excise Duty Act for the current figure before invoicing or clearing goods. Our Excise calculator covers ad valorem items only; use KRA's BTLS portal for specific-duty computations.

Import Duty & Taxes at Entry

All imports into Kenya are valued at CIF (Cost + Insurance + Freight). The KRA then stacks duties in a specific order, with each tax compounding on the previous.

For motor vehicles, KRA compares the declared CIF to the Current Retail Selling Price (CRSP), depreciated based on the vehicle's age, and uses the higher of the two as the customs value. Vehicles older than 8 years cannot be imported.

Key Tax Deadlines

Missing a tax deadline triggers penalties (typically 5% of tax due or KES 10,000, whichever is higher) plus interest at 1% per month on unpaid amounts. The most important dates are: