The Finance Act, 2025, signed into law on 26 June 2025, introduces major changes to Kenya’s Tax Procedures Act, 2015, reshaping compliance, enforcement, and taxpayer rights. These reforms are part of the government’s push to align Kenya’s tax framework with modern economic realities and digital transformation.
At UHY Kenya, we’ve broken down the changes you need to know so you can stay compliant and avoid unnecessary penalties.
1. Certificate of Origin – Now Mandatory for All Imports
Importers must now provide a Certificate of Origin (CoO) issued by a competent authority in the exporting country. This document verifies where goods were manufactured and will be critical for benefiting from:
- Excise duty exemptions
- Preferential trade agreements
Failure to comply could result in seizure or forfeiture of goods. Businesses should audit their supply chains and documentation processes now.
2. Amended Assessments Must State Reasons
Section 32(8A) now requires that any amended assessment from the Commissioner must include reasons for the change. This improves transparency and gives taxpayers clearer grounds for objection.
3. Changes to Electronic Tax Invoicing Exemptions
Section 23A(4) updates the list of transactions excluded from mandatory electronic tax invoicing. Exempt transactions now include:
- Salary and wage payments
- Imports
- Interest payments
- Investment allowance entries
- Airline ticketing
- Payments subject to final withholding tax
4. No Double Tax on Withholding Failures
A new rule in Section 39A ensures that if a withholding agent fails to deduct tax but the recipient has already paid it, the principal tax cannot be collected twice. However, penalties and interest for non-compliance can still apply.
5. Stronger Enforcement Powers for KRA
- KRA can now issue third-party agency notices to collect taxes from both residents and non-residents.
- Agents holding funds for non-residents with Kenyan-sourced income must remit taxes when instructed by KRA.
- Security over property for unpaid stamp duty can be registered without registrar fees and only released when full arrears are settled.
6. VAT Withholding and DST Agent Changes
- The automatic 10% penalty for failure to withhold/remit VAT (Section 42A(4D)) has been removed but other penalties can still apply under general provisions.
- Section 42B (Digital Service Tax agent appointments) has been repealed, signaling a possible shift in DST administration.
For related VAT updates, see our Finance Bill 2025 VAT Amendments.
7. Extended Refund Timelines
- Overpayment claim processing time increased from 90 to 120 days (or 180 days if an audit is required).
- Clarification that VAT refunds apply specifically to imports.
8. Private Rulings – More Access for Taxpayers
Taxpayers can now request a private ruling even if a public ruling exists, provided the matter hasn’t been addressed in an assessment or public ruling.
9. Stricter Late Filing Penalties
- Penalties now apply for both late filing and failure to file returns.
- The Commissioner’s 60-day deadline to make an objection decision starts from the date a valid objection is lodged.
10. Penalty & Interest Waivers in Special Circumstances
The Cabinet Secretary for the National Treasury can now waive penalties or interest in cases such as:
- iTax system errors
- Delays in updating tax systems
- Duplicate charges caused by system malfunction
- Incorrect taxpayer registration
Why This Matters for Businesses
The 2025 amendments strengthen KRA’s enforcement powers while also improving transparency and taxpayer rights. Businesses should:
- Review compliance processes for invoicing and withholding
- Update import documentation procedures
- Track refund timelines carefully
- File all returns on time even with no payment due
📞 Need help adapting to these changes?
UHY Kenya’s tax advisory team is ready to help you navigate the new Tax Procedures Act provisions with compliance confidence.
Call us: +254 758 860047
Visit: www.uhy-ke.com
Related Reading
- Finance Bill 2025 VAT Amendments
- Finance Bill 2025 Excise Duty Act Changes
- Common VAT Compliance Mistakes in Kenya
