The act which targets to streamline tax administration and increase revenue collection has introduced key amendments to Income Tax Act, the Stamp Duty Act, the Excise Duty Act, Tax Procedures Act, and Value Added Tax Act which are expected to sustain revenue collection for the fiscal year 2025/26.

Among amendments made include the Income Tax Act which now mandates employers to apply all applicable reliefs, deductions and exemptions to an employee automatically, as provided by the relevant law.

Under the law, private sector employers will now be required to pay their employees a daily subsistence allowance of Ksh 10,000 which is tax exempt, a 400pc increase from the previous Ksh 2,000.

Beginning July 1, 2025 employee will also benefit from income tax exemption on all payments of gratuity and allowances paid under a pension scheme.

In a bid to further widen the tax base, the new law provides that non-residents pay income tax on income from the provision of services derived from Kenya through a business carried out over the digital market place.

The act has also repealed the Digital Assets Tax which has been substituted with an excise duty rate of 5pc on the transaction fees payable to the virtual asset providers.

“The lower excise duty will promote innovation and enhance investments in digital assets.”

President Ruto also assented to the Appropriations Bill 2025 which seeks to authorize the National Treasury to issue a total of Ksh 1.88 trillion out of the Consolidated Fund and apply it towards the supply granted for the service of the year ending June 30, 2026.

The act further authorizes Ministries, Departments and Agencies (MDAs) to utilize the money they collect as Appropriation in Aid amounting to Ksh 671.99 billion as approved by the House.

In the FY2025/26, Treasury is expected to spend Ksh 1.8 trillion on recurrent expenditure and Ksh 744.52 billion in development expenditure.

Through the act, Ksh 47.6 billion has been allocated to support the agriculture and food security sub-sector while Ksh 2.7 billion will go towards initiatives targeting Micro, Small, and Medium Enterprises (MSMEs) and households in accessing affordable credit.

Another Ksh 18 billion will go towards building necessary linkages between agricultural transformation, MSME development and manufacturing through value chain development.

The government also targets to spend Ksh 133.4 billion on Universal Health Coverage, Ksh 658.4 billion on education sector and Ksh 217.3 billion for the construction, maintenance, and rehabilitation of roads and bridges across the country during the new budget cycle.