KRA Reminds Taxpayers on Fringe Benefit Tax and Deemed Interest Rate

The Kenya Revenue Authority (KRA) has reminded taxpayers, employers and business owners to comply with the latest tax requirements on Fringe Benefit Tax and Deemed Interest Rate for the months of April, May and June 2026.

In a public notice released on May 13,2026, KRA announced that the market interest rate for Fringe Benefit Tax remains at 8% for the three-month period.

The tax authority also confirmed that the prescribed rate of interest for Deemed Interest Rate is 8% for the same period.

KRA Issues Public Notice

According to the notice, the rates apply under the Income Tax Act and are meant to guide employers and businesses when calculating taxes on employee loans and related benefits.

“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 8%. This rate shall be applicable for the three months of April, May, and June 2026,” KRA said.

The authority further stated,“For purposes of Section 16(2) (ja) of the Income Tax Act, the prescribed rate of interest is 8%. This rate is applicable for the months of April, May and June 2026.”

Employers Asked to Comply

KRA urged employers and taxpayers to remain updated and ensure they comply with the tax rules to avoid penalties and inconveniences.

The authority also reminded businesses that withholding tax on deemed interest must be deducted and paid within the required timeline.

“Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the Commissioner within 5 working days,” the notice added.

Also Read: Mbadi Speaks on PAYE Rates and Time for Filing KRA Returns

What Fringe Benefit Tax Means

Fringe Benefit Tax applies when employers offer employees loans at interest rates lower than the market rate set by KRA.

The tax is charged on the difference between the market interest rate and the lower rate offered to employees.

Also Read: 5 Easy Steps to Clear Your Tax Balance on iTax

Deemed interest, on the other hand, applies to interest-free or low-interest loans given by companies, especially to related parties.

KRA Calls for Timely Action

KRA encouraged taxpayers to review the notice carefully and take the necessary action where applicable.

“Please review the notice carefully and take the necessary action where applicable.”

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KRA Announces 8% Fringe Benefit Tax for April-June 2026
PHOTO/KRA