Kenya sets 9% fringe-benefit and deemed-interest rates for the fourth quarter

Employer loans

For section 12B of the Income Tax Act, the market interest rate is 9% for the three months ending 31 December 2026. The rate matters where an employer provides a loan to an employee, director or their relative below the market rate: KRA guidance describes the taxable fringe benefit as the difference between interest calculated at the market rate and the interest actually paid.^[1][2]

Deemed interest

For section 16(2)(ja), KRA also prescribed a 9% deemed-interest rate for October to December. The notice states that withholding tax at 15% must be deducted from the deemed interest and paid to the Commissioner within five working days. The notice changes the prescribed rate; it does not expand the taxpayers or financing arrangements to which section 16(2)(ja) applies.^[1]

Group action

Groups with Kenyan employment loans or financing within the deemed-interest provision should update fourth-quarter calculations from 8% to 9%, retain the notice with their workpapers and separately test the underlying statutory conditions. The two calculations arise under different provisions, so the common percentage should not be treated as making their scope identical.^[1][2]