The Kenya Revenue Authority (KRA) has announced the prescribed interest rates that will apply to various tax provisions during the second half of 2026.
In a notice issued on Wednesday, July 8, KRA said the prescribed interest rate has been set at 8 percent across three tax categories, although the duration of application differs for each.
For Fringe Benefit Tax, the market interest rate of 8 percent will apply during the third quarter of 2026, covering July, August and September.
The Kenya Revenue Authority (KRA). Photo: Courtesy.
The authority also set the prescribed interest rate for deemed interest at 8 percent for the same three-month period of July through September 2026.
In addition, KRA noted that withholding tax on deemed interest remains applicable.
A 15 percent withholding tax must be deducted from the deemed interest and remitted to the Commissioner within five working days.
For Low Interest Benefit, KRA prescribed an 8 percent interest rate for a longer period of six months, running from July to December 2026.
The prescribed rates are reviewed periodically and are used in calculating the taxable value of benefits arising from employer-provided loans, as well as determining the tax treatment of certain interest-free or low-interest financial arrangements under the Income Tax Act.
Employers offering loans to employees below the prescribed market rate are required to use the announced interest rate when computing taxable fringe benefits.
Similarly, businesses involved in transactions that attract deemed interest are expected to apply the prescribed rate when determining their tax obligations.
KRA urged taxpayers to ensure they apply the new rates correctly during the specified periods to remain compliant with tax laws and avoid penalties or interest that may arise from incorrect tax computations or late remittances.
