Kenya's KRA raises fringe benefit tax market rate to 9% for October–December 2026

The Kenya Revenue Authority (KRA) has raised the market interest rate used to calculate fringe benefit tax to 9% for October, November and December 2026, from 8% for July to September, according to a public notice dated 22 October 2026.

The notice sets the market interest rate under Section 12B of the Income Tax Act, which covers fringe benefit tax, at 9% for those three months. For Section 16(2)(ja) of the Act, the prescribed rate of interest on deemed interest is also 9%, for the same October–December period.

The notice repeats the withholding rule: tax of 15% on the deemed interest is to be deducted and paid to the Commissioner within five working days. It is signed by the Commissioner for Micro & Small Taxpayers.

The previous notice, for July to September 2026, set both the market interest rate and the Section 16(2)(ja) prescribed rate at 8%. That notice also set the prescribed rate of interest under Section 5(2A), the low interest benefit, at 8% for the six months from July to December 2026. KRA's notices for January to March and April to June 2026 also put the market interest rate and the deemed interest rate at 8%.

Fringe benefit tax falls on employers. KRA's guidance on the tax says it is payable by every employer in respect of a loan provided to an employee, a director or their relatives at a below-market rate. The taxable value is the difference between the interest that would be payable at the market rate and the interest actually paid on the loan.

The same guidance says the tax is charged on the monthly value of the benefit and is due on or before the 9th of the following month. It says the prescribed rate of interest is based on market lending rates and that the Commissioner may set it every quarter.

The guidance, dated 23 December 2020, gives an example: on a KSh 3,000,000 loan at 3% interest with a market rate of 9%, the annual benefit is KSh 180,000, or KSh 15,000 a month. At 30%, the monthly tax is KSh 4,500. The 30% in the example is not a rate set by this notice.