KRA Confirms 8% Market Rate for Fringe Benefit Tax as Year Ends

The Kenya Revenue Authority (KRA) has announced that the market interest rate for calculating Fringe Benefit Tax and the deemed interest rate for loans will remain at 8 per cent for October, November, and December 2025.

In a statement released by the Commissioner for Micro and Small Taxpayers on Tuesday, October 21, KRA said the move is in line with Sections 12B and 16(2)(ja) of the Income Tax Act. The decision provides clarity to employers and businesses as they close the financial year.

“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 8 per cent,” the statement read. “This rate shall be applicable for the three months of October, November, and December 2025.”

KRA also confirmed that the deemed interest rate, used to calculate tax on low-interest or interest-free loans offered by employers to employees, will be pegged at the same rate. “For purposes of Section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 8 per cent,” it added.

The taxman further reminded employers and financial institutions that a withholding tax of 15 per cent on the deemed interest must be deducted and remitted to the Commissioner within five working days.

This is part of ongoing efforts to enhance compliance and streamline tax remittance processes.

Tax experts say the announcement brings predictability for businesses and taxpayers as they plan end-of-year financial obligations.

It also reflects KRA’s continued drive to simplify communication with taxpayers, especially in the micro and small business segments.

The announcement comes as the country heads into the last quarter of the year, a period when most employers and businesses reconcile accounts and finalise tax filings.

By maintaining a consistent 8 per cent rate, KRA aims to ensure stability and fairness in the tax environment, while boosting compliance among employers who provide fringe benefits or staff loans.

With the notice now in effect, taxpayers are encouraged to ensure all deductions, filings, and remittances related to Fringe Benefit Tax and deemed interest are made promptly to avoid penalties.