President William Ruto has signed into law the Finance Bill 2025, along with the Appropriations Bill and the Supplementary Appropriation Bill, in a ceremony held at State House, Nairobi. The enactment of these three crucial laws sets the stage for significant changes in Kenya’s fiscal and development agenda for the 2025/26 financial year.
The Finance Act 2025 introduces a range of tax reforms aimed at boosting investment, easing tax compliance, and supporting innovation. Notably, it mandates employers to automatically apply all tax exemptions and deductions for their employees, offering much-needed tax relief. The tax-exempt daily subsistence allowance has been significantly increased from KSh2,000 to KSh10,000.
In a major shift to encourage digital innovation, the controversial Digital Assets Tax has been repealed and replaced by a 5% excise duty on transaction fees charged by virtual asset providers. Additionally, Capital Gains Tax will now be reduced from 15% to 5% for large-scale investments certified by the Nairobi International Financial Centre (NIFC), a move expected to attract foreign direct investment.
The law also introduces excise duties on betting, gaming, and digital services, while making compliance easier for small-scale distillers. Farmers and manufacturers will benefit from tax exemptions on raw materials and inputs, supporting agro-industrial growth.
The Appropriations Act authorises the withdrawal of KSh1.88 trillion from the Consolidated Fund, with an additional KSh671.99 billion to be raised internally by government entities as Appropriations-in-Aid.
Key allocations include KSh658.4 billion for education, covering teacher recruitment, free education, and university scholarships. The health sector receives KSh133.4 billion, supporting Universal Health Coverage and disease prevention programs. The agriculture sector sees a boost of KSh47.6 billion, including funding for fertiliser subsidies and value chain development. Infrastructure development gets KSh217.3 billion for roads and bridges, and KSh62.8 billion for energy projects, including clean energy initiatives.
The Supplementary Appropriation Bill, also enacted, adjusts current spending to align with emerging needs.
Collectively, the new laws are expected to reshape Kenya’s economic trajectory, promote innovation, and strengthen service delivery across key sectors.
