The Finance Act, 2026 introduces significant reforms to the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Stamp Duty Act. These amendments focus on enhancing data-driven assessments, extending tax amnesties, and providing targeted exemptions for large-scale infrastructure and investment vehicles.
1. Changes to the Tax Procedures Act (TPA)
The TPA sees the most extensive administrative changes, largely aimed at integrating technology and international standards into tax compliance.
- Virtual Asset Service Provider (VASP) Reporting: New Sections 6C and 6D require VASPs to file annual information returns regarding their users. Kenya may now also enter into international agreements for the automatic exchange of information regarding virtual asset transactions to curb tax evasion.
- Reinstatement of Registration: A new provision (Section 10(9)) allows persons who were previously deregistered to apply for reinstatement of registration. If approved, they will be issued the same PIN they held prior to deregistration.
- PIN Exemption for Non-Residents: To encourage foreign investment, non-resident persons are now exempt from the PIN requirement when opening accounts with investment banks and financial institutions.
- New Anti-Avoidance Provision (Section 18A): The Commissioner is granted specific powers to determine tax liabilities by disregarding tax avoidance schemes. This determination can be based on a wide array of data sources, including electronic tax invoices and third-party returns.
- Export Declaration Requirement: Importers are now required to obtain and retain export declarations (or equivalent customs documents) from the country of origin for five years. Failure to produce these can lead to the Commissioner rejecting claims related to the value or origin of goods.
- Data-Driven Assessments (Section 29A): The Commissioner may now issue assessments on a person’s income based on information obtained from various systems, including the electronic tax invoice system and the data management and reporting system.
- Extended Tax Amnesty (Section 37E): The amnesty on interest, penalties, and fines is extended. It now applies to principal tax debts due before December 31, 2025, provided the principal is settled by December 31, 2026.
- Pre-populated Tax Returns: The Commissioner is empowered to generate pre-populated tax returns by the end of January each year. Taxpayers have two months to confirm or amend these returns.
- Electronic System Penalties: Section 86 is replaced with stricter penalties for failing to issue electronic invoices, file electronic returns, or pay tax electronically. If the reasons for non-compliance are unsatisfactory, companies face a penalty of KSh. 100,000 and individuals KSh. 10,000, or 5% of the tax due, whichever is higher.
2. Changes to the Miscellaneous Fees and Levies Act
The amendments here focus on aligning definitions for the aviation sector and providing incentives for energy infrastructure.
- LPG Infrastructure Incentives: The Act introduces a new exemption from the Import Declaration Fee (IDF) and the Railway Development Levy (RDL) for goods used in the construction of liquefied petroleum gas (LPG) storage tanks and related infrastructure. This applies where the investment value is at least KSh. 5 billion.
- Aviation Sector Alignment: The Second Schedule is amended to exempt all parts of Chapter 88 (aircraft and spacecraft) and specific aircraft under tariff headings 8802.30.00 and 8802.40.00 from both IDF and RDL.
- Collection of Other Fees (Section 39B): A significant administrative change allows the Commissioner to recover any unpaid fees, levies, or charges imposed under other laws as if they were unpaid tax under the TPA.
3. Changes to the Stamp Duty Act
The primary change to the Stamp Duty Act mirrors the incentives provided in the Capital Gains Tax regime for investment vehicles.
- REIT Beneficial Interest Exemption: Section 96A is amended to exempt from stamp duty any instrument that results in the transfer of a beneficial interest in property from a person or persons to a Real Estate Investment Trust (REIT). This facilitates the pooling of property assets into regulated investment structures without the friction of high transfer duties.
