The Kenya Revenue Authority (KRA) has set new tax rates for the Fringe Benefit Tax (FBT), Deemed Interest Rate, and Low-Interest Benefit effective for January, February and March. What are the new KRA rates? The taxman announced in a statement on Friday, January 17, that it had reduced the Fringe Benefit Tax and Deemed Interest Rate from 16% to 13%. Similarly, the government’s principal revenue collector said that it had cut the Low-Interest Benefit by 2%, from 16% to 14%. “For purposes of Section 12b of the Income Tax Act, the market interest rate for the Fringe Benefit Tax is 13%. This shall be applicable for the months of January, February and March 2025,” KRA stated.
What is Fringe Benefit Tax? According to KRA, employers are required to pay the Fringe Benefit Tax for loans extended to an employee at a lower interest rate than the prevailing market rate. The taxable value for Fringe Benefit Tax is determined by the disparity between the market interest rate and the actual interest disbursed on the loan. If the loan term surpasses the employment termination date, the tax is applicable as long as the loan remains outstanding.
FBT is levied on the assessable value of a fringe benefit offered by the employer in a given month and is to be settled on or before the 9th of the subsequent month. “Fringe Benefit Tax is charged on the taxable value of a fringe benefit provided by employers. The prescribed rate of interest is based on the market lending rates as the commissioner may prescribe every quarter of the year,” KRA explained.
by Japhet Ruto
