The National Assembly Finance Committee has rejected a proposal by the National Treasury to eliminate a 15 percent tax incentive for real estate developers and local motor vehicle assemblers. The proposal was part of the 2025 Finance Bill and had drawn sharp criticism from stakeholders during the public participation phase.
The Treasury had sought to amend the Third Schedule of the Income Tax Act, scrapping the preferential corporate tax rate for developers constructing at least 100 residential units annually, as well as businesses engaged in local vehicle assembly. These incentives were initially introduced to boost affordable housing and support local manufacturing under Kenya’s industrialization agenda.
However, the Molo MP Kuria Kimani-led Finance Committee noted that eliminating these tax benefits would “disincentivize investment in the real estate sector” and potentially increase housing costs, especially for projects under the affordable housing initiative. The committee also warned that the proposed removal of the vehicle assembly tax incentive would negatively impact the automotive industry, potentially undermining gains made in local manufacturing.
“This is in keeping with predictability and stability within the tax system and fostering a more favourable business environment,” the committee stated in its report.
The decision comes as Treasury Cabinet Secretary John Mbadi presented a Ksh.4.2 trillion budget for the 2025/26 financial year, targeting Ksh.30 billion in additional revenue through various tax adjustments. Notably, the Finance Bill does not introduce new taxes—an apparent response to last year’s widespread protests against tax hikes in the 2024 Finance Bill, which forced the government to roll back several unpopular measures.
The Finance Committee’s recommendation now goes to MPs for voting before the bill proceeds to President William Ruto for assent. If adopted, the continued tax relief is expected to encourage developers and assemblers to maintain or increase their investments, supporting job creation and economic growth.
With Kenya still grappling with economic recovery and rising living costs, the move is seen as a balancing act between boosting revenue collection and maintaining investor confidence.
