Global Daily Tax News, Kenya Cuts Tax-Related Interest Rates, (Apr 21, 2025)

The Kenya Revenue Authority has again substantially lowered the market interest rate for calculating the fringe benefit tax due on non-arm's length loans and the interest rate for related-party loans.

The KRA said, for the purposes of Section 12B of the Income Tax Act, the Market Interest Rate will be nine percent, down from 13 percent, for the three months April, May, and June 2025. Under Section 12B, an employer is required to withhold FBT where a loan is provided to an employee that bears an interest rate lower than the market interest rate.

The deemed rate of interest on interest-free loans between a resident company and non-resident connected entities is also nine percent, down from 13 percent. Tax should be withheld at a rate of 15 percent on the deemed interest and paid to the Commissioner within five working days.

For the purposes of Section 5(2A) of the Income Tax Act, concerning low interest benefits provided to employees and directors, the prescribed interest rate for the first six months of 2025 is 14 percent, down from 16 percent.