KRA Retains 8% Fringe Benefit Tax on Employee Benefits Till March 2026, Ensuring Stability and Compliance

The Kenya Revenue Authority (KRA) has confirmed that the Fringe Benefit Tax (FBT) rate will remain at 8% for the first quarter of 2026. This decision ensures stability for employers and employees while reinforcing compliance across the private sector. The tax rate will be applicable from January to March.

Fringe Benefit Tax applies to non-cash benefits that employees receive in addition to their salaries. Staff loan schemes are the most common source of these benefits. Even when no money changes hands, KRA treats these advantages as taxable employment income.

Under the KRA benchmark approach, the taxable value is calculated by subtracting the actual interest paid by the employee from the market interest rate. The difference determines the amount liable for tax. This method ensures fair taxation while reflecting prevailing lending conditions.

In its statement, KRA said the 8% rate aligns with Section 12B of the Income Tax Act. The authority reviews the tax quarterly in line with the Central Bank of Kenya’s (CBK) market rates. The CBK’s monetary policy guides the review and helps maintain economic stability.

Recently, CBK has lowered its benchmark rate to encourage private sector lending and boost economic growth. Stable exchange rates and falling food and energy prices have also eased inflationary pressures. These trends support a lower, predictable tax environment for employers and employees alike.

Meanwhile, KRA is tightening compliance measures. The authority suspended the filing of nil returns until May 1, 2026, to improve data accuracy. Deputy Commissioner Patience Njau said the move targets zero filers and non-filers, turning them into active taxpayers.

Overall, retaining the 8% FBT provides certainty for companies offering staff benefits. Employers and employees can plan without worrying about sudden changes in tax rates. KRA has reiterated that future adjustments will continue to reflect market conditions and CBK’s monetary policy, ensuring fairness and economic stability.