On June 19, 2025, Parliament passed the Finance Bill 2025 after intense debate and massive public interest. But what does this mean for you, the ordinary mwananchi trying to make ends meet, build a life, raise a family, and grow a hustle?

The Bill touches on everyday life: what you earn, what you spend, how you save, and how the government uses your taxes.

In the Bill, which has received its fair share of criticism, there are several key areas the government, through the Ministry of Treasury, argued would benefit Kenyans.

Firstly, the Bill proposes an amendment to the First Schedule of the Income Tax Act to explicitly exempt gratuity and other allowances paid under public pension schemes from taxation. It further seeks to repeal subsections (4) to (9A) of Section 8 of the Income Tax Act, which currently govern the tax treatment of pensions and retirement benefits under both private schemes and the National Social Security Fund (NSSF).

Protesters during the anti-Finance Bill demonstrations in Kenya.

Photo

Mint

Since the Bill was passed, this now means that if you are retiring, your full payout is yours. No more tax deductions on your gratuity.

Additionally, the Bill had proposed an increased tax-free ceiling for per diems from the current Ksh2,000 to Ksh10,000. This means that employees receiving a daily allowance for official travel will have a larger portion of that allowance exempt from income tax. This change is to be effective from July 1, 2025.

If you trade in cryptocurrency, NFTs, or earn online, your tax is now halved. Specifically, the Bill proposes a reduction in the Digital Asset Tax rate from the current three per cent to 1.5 per cent. This tax is levied on the transfer or exchange value of digital assets.

According to the government, this move would be key in encouraging youth and digital hustlers to thrive in an online economy and ensure compliance by making the tax burden less prohibitive.

In this year’s Finance Bill, provisions were made that directly affected foreign companies like Netflix and Google. The primary tax touching on these digital service providers is the Significant Economic Presence (SEP) Tax, which is intended to replace the previous Digital Service Tax (DST).

The 2025 Finance Bill proposed to expand the scope of the SEP tax to include income derived or accrued from Kenya through a business carried out via the internet or an electronic network, including through a digital marketplace. 

This directly targets non-resident entities that generate revenue from Kenyan consumers without necessarily having a physical presence in the country. This means platforms offering streaming services (like Netflix), digital advertising (like Google Ads), online marketplaces, and other digital content services would be subject to this tax.

By doing so, local digital companies could compete fairly, and Kenya earns revenue from foreign profits.

The 2025 Kenyan Finance Bill included a provision where the Excise Duty Act would adopt the East African Community (EAC) Customs Union Protocol for goods classification. The move is designed to standardise classification rules for goods, reduce customs disputes, improve regional trade consistency, and support import/export accuracy.

Essentially, the provision is aimed at aligning Kenya's excise duty classifications with those of the broader EAC bloc, enabling smoother trade within the region.

The Bill also promised tax relief whereby one would no longer need to buy a house to get mortgage tax relief — even if you build through a SACCO or a personal loan, you qualify automatically.

For companies, the Bill introduced a provision aimed at providing clear tax terms, particularly for large companies involved in international transactions. This was done through the introduction of an Advance Pricing Agreement (APA) framework.

APAs are agreements between the Kenya Revenue Authority (KRA) and a taxpayer (typically a large multinational company) that determine, in advance, the pricing methods to be applied to specific related-party transactions for a set period.

Through this, big firms can agree on tax arrangements with KRA for up to five years, with the framework designed to attract stable investment and protect jobs.

Other provisions, such as no introduction of new PAYE tax bands, restrictions on the taxman’s ability to access one’s data, zero-rated tax reforms on essential commodities, and corporate tax breaks for key sectors, were included in the new Finance Bill.

In recent times, the Finance Bill has become a touchy subject among the Kenyan population, especially after demonstrations were witnessed following the passing of the 2024 Finance Bill.

President William Ruto during the signing of the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2025 at State House, Nairobi on June 17, 2025.

PCS