Pan-African law firm Bowmans has raised serious concerns about several provisions in Kenya’s Finance Bill 2026, warning that a number of the proposed measures could pile additional pressure on businesses and consumers already navigating a tough economic environment.
While the firm acknowledged the government’s drive to widen the tax base and strengthen revenue collection, it cautioned that the path chosen to get there could carry significant economic consequences. Bowmans flagged several proposals that, in its assessment, introduce uncertainty and risk exposing taxpayers to double taxation, a combination the firm warns could chip away at Kenya’s appeal as an investment destination at a time when the country is competing hard for foreign capital.
Among the provisions drawing the sharpest scrutiny is a proposal to cut the tax filing window by two months, moving the annual deadline to April 30 of each year. Critics argue the tighter timeline would give businesses and individuals less room to compile accurate returns, potentially increasing errors, penalties, and compliance costs across the board.
Bowmans noted that shrinking the filing window would drive up the cost of compliance, forcing corporate entities to deploy additional resources simply to meet the tighter deadline, a burden that falls hardest on businesses already stretched thin.
“If enacted into law, this proposal would significantly reduce the timeline within which entities have to complete their audit processes, determine the balance of tax payable, and prepare and file the corporate income tax return,” Bowmans noted.
The firm also pointed out another contentious proposal: the introduction of withholding tax on fees charged in card transactions, covering interchange and merchant service fees. Bowmans warned that this measure could saddle businesses with a heavy compliance burden, requiring them to manually deduct taxes on fees that banking systems typically process automatically in the background.
For many businesses, particularly smaller operators with limited finance teams, building a parallel compliance layer around transactions that already happen without human intervention would represent a significant and costly disruption to daily operations.
The firm also raised alarms over the government’s move to subject fintech services to value-added tax. By stripping away existing VAT exemptions on services such as money transfers and payment processing, Bowmans argued that the bill would make digital financial services more expensive for everyday users and businesses alike.
“The effect of this proposal would be to make players in the fintech sector less competitive as compared to players in the traditional financial institutions,” Bowmans noted.
The criticism further extended to the proposed increase in residential rental income tax, which the bill seeks to raise from 7.5 percent to 10 percent. Bowmans described the move as inconsistent and warned that it could trigger widespread non-compliance among landlords who may find the higher rate difficult to justify against their operating costs.
In the corporate space, the firm pushed back strongly against a proposal granting the Kenya Revenue Authority the power to treat at least 60 percent of undistributed company profits as dividends for tax purposes. Bowmans called the measure retrogressive, arguing that it ignores the legitimate business reasons companies hold onto profits, from reinvestment plans to cash flow management, and effectively punishes prudent financial planning.
The firm also sounded the alarm on proposed higher excise duties targeting mobile phones and communication devices, warning that the move would push retail prices higher and could undermine local manufacturing ambitions at a critical moment for the sector.
Despite the broad wave of criticism, Bowmans found room to welcome several provisions in the Bill. The firm applauded proposed clarifications to trust taxation rules, reforms to the penalty framework, and the extension of the tax amnesty programme, describing these as constructive steps in the right direction.
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