The Kenya Revenue Authority (KRA) has retained the market interest rate for Fringe Benefit Tax (FBT) and the prescribed rate for Deemed Interest at 8 percent for the last quarter of 2025.
In a public notice issued on Tuesday, October 21, the Commissioner for Micro and Small Taxpayers confirmed that the rates will apply throughout October, November, and December 2025.
“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 8%. This rate shall be applicable for the three months of October, November and December 2025,” the notice stated.
KRA further clarified: “For purposes of Section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 8%. This rate is applicable for the months of October, November and December 2025.”
The Kenya Revenue Authority (KRA) has reminded employers and financial institutions of a 15 percent withholding tax on presumed interest, which must be deducted and remitted to the Commissioner within five working days.
The recent announcement is consistent with the last quarter, when the market and deemed interest rates were also at 8 percent. The rates varied earlier in the year – 13 percent for January to March, 9 percent for April to June, and 8 percent for July to September 2025. To put that in perspective, the rate was 16 percent during the last quarter of 2024.
Fringe Benefit Tax (FBT) is levied on employers who offer loans to employees, directors, or members of their families at less than the market rate. The tax is calculated on the difference between the market rate and the actual interest rate charged on the loan.
Employers with a PAYE obligation must remit FBT by the 9th day of the following month. Late remittance attracts a penalty of 25 percent on the tax due, while delayed payment incurs an additional 5 percent penalty.
The Deemed Interest provision under Section 16(2)(ja) of the Income Tax Act applies to situations where employers issue interest-free or low-interest loans. In such cases, KRA requires employers to compute tax on the notional interest and remit the 15 percent withholding tax accordingly.
By keeping the rate at 8 percent, KRA has provided businesses with much-needed predictability as they close the financial year. The stable rate helps employers plan their end-of-year obligations without unexpected tax adjustments.
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