The Kenya Revenue Authority (KRA) has set the Fringe Benefits Tax (FBT) and Deemed Interest Tax rates at 8 percent for the final quarter of 2025, covering the months of October, November, and December.
In a notice released on Tuesday, October 21, KRA directed employers to comply with the updated rates, which determine the tax payable on employee benefits such as low-interest loans or non-cash perks.
Fringe Benefit Tax is imposed on employers who offer loans to employees, company directors, or their relatives at below-market interest rates. The tax is calculated on the “deemed benefit” the difference between the market interest rate and the actual interest charged by the employer.
“The Market Interest Rate for purposes of Section 12B of the Income Tax Act is 8%. This shall apply for the three months of October, November, and December 2025,” read the statement from KRA.
In addition to employee loans, the tax also applies to other non-cash benefits, including vehicles and allowances, that are not part of an employee’s gross pay. The FBT is charged at the prevailing corporate tax rate, currently 30 percent.
KRA also confirmed that the Deemed Interest Rate, used to determine whether an employer has provided a taxable benefit through a low-interest loan, will remain aligned with the 8 percent market rate for the same period.
The tax authority explained that the move aims to curb tax avoidance practices, ensuring employers do not disguise income as low-interest loans or transfer profits between multinational subsidiaries through interest rate manipulation.
The prescribed rate is reviewed quarterly by the Commissioner for Domestic Taxes and is typically tied to the 91-day Treasury Bill rate plus a set margin.
Employers are now required to apply the new 8 percent rate when calculating fringe benefits and deemed interest tax obligations for the last quarter of the year.
 has set the Fringe Benefits Tax (FBT) and Deemed Interest Tax rates at 8 percent for the final quarter of 2025, covering the months of October, November, and December.){kind=link}
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