The Kenya Revenue Authority (KRA) has announced that the market interest rate for Fringe Benefit Tax (FBT) will remain at 8% for the final quarter of 2025, covering the months of October, November and December.
- •Fringe Benefit Tax is imposed on benefits that employees receive from their employers outside of their normal salary, such as low-interest loans, company vehicles, or employer-provided housing.
- •According to a notice issued under the Income Tax Act, this rate will be used by employers when determining the taxable value of certain non-cash employee benefits.
- •The same 8% rate also applies as the prescribed rate under Section 16(2)(ja) of the Act for the same period.
The tax ensures that these perks are appropriately valued and taxed as part of an employee’s overall compensation package.
For example, if an employee receives a KShs 1 million loan at 2% interest while the market rate is 8%, the 6% difference is treated as a taxable fringe benefit. The employer is responsible for calculating and paying the corresponding tax, not the employee.
In addition, the KRA has confirmed that a withholding tax of 15% on the deemed interest must be deducted and remitted to the Commissioner within 5 working days.
