The Kenya Revenue Authority (KRA) has revised the Fringe Benefit Tax and Deemed Interest Rate applicable from April through June 2025, setting both rates at nine per cent.
In an official notice issued on Tuesday, April 8, KRA disclosed that the new market interest rate, used to compute these tax categories, has been updated in line with Section 12B of the Income Tax Act.
“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 9%. This rate shall be applicable for the three months of April, May and June 2025,” the statement read.
Fringe Benefit Tax is levied on employers who extend loans to employees at interest rates below the official market rate or offer non-cash perks such as company cars or housing.
In addition, KRA confirmed that the Deemed Interest Rate—used to tax interest-free loans given by foreign-controlled entities to Kenyan residents—will also remain at nine per cent during the quarter.
“For purposes of section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 9%. This rate is applicable for the months of April, May, and June 2025,” KRA added.
Any deemed interest will attract a 15 per cent withholding tax, which must be submitted to the Commissioner within five working days, the notice stated.
The updated rates mark a continued downward trend. Earlier in January, KRA had reduced the Deemed Interest Rate and Fringe Benefit Tax from 16 to 13 per cent, and lowered the Low-Interest Benefit to 14 per cent—a figure that remains unchanged in the latest adjustment.
These changes come as the tax authority continues to recalibrate its rates in response to prevailing economic conditions, aiming to strike a balance between revenue collection and maintaining a conducive business environment.