The Finance Act 2026 changes for Kenyan SMEs, with dates: the tax amnesty deadline of 31 December 2026, new eTIMS penalties, pre-populated returns, and individual returns due by 30 April from 2027.
Reviewed 9 Nov 2026 · By Dr Remmy Nyongesa, CPA-K
For most SMEs, the Finance Act 2026 matters in three ways. There is a deadline: the tax amnesty on penalties and interest closes on 31 December 2026. KRA will apply a new, fixed penalty for not issuing eTIMS invoices. And individuals must file their returns two months earlier from 2027. The PAYE bands did not change. This guide covers only what was enacted, with the date each change starts.
The Act (No. 19 of 2026) received assent on 23 June 2026. Section 1 sets three start dates: most sections took effect on 1 July 2026, section 43 on 1 September 2026, and sections 17, 18 and 24 on 1 January 2027 (Finance Act 2026).
The changes most likely to affect a small business:
| Change | What the law now says | Starts |
|---|---|---|
| Tax amnesty extended (Tax Procedures Act s.37E) | Penalties and interest on tax for periods up to 31 December 2025 can be waived if the principal tax is paid by 31 December 2026 | 1 July 2026 |
| eTIMS and e-filing penalty (new s.86) | KRA must first ask for reasons. If it does not accept them, the penalty is the higher of 5% of the tax due, or KES 100,000 for a company (KES 10,000 for an individual) | 1 July 2026 |
| Waiver for system errors (s.89(5B)) | KRA may waive penalties or interest up to KES 2 million caused by an error in an electronic tax system | 1 July 2026 |
| Pre-populated returns (s.75) | KRA may issue a pre-filled return by the end of January; you have two months to confirm or amend it | 1 July 2026 |
| Assessments from third-party data (new s.29A) | KRA may assess income using data from eTIMS, withholding tax and other returns, after asking for information at least 30 days beforehand | 1 July 2026 |
| Withholding tax on scrap metal | 1.5% of the gross amount | 1 July 2026 |
| Gratuity | Contributions to a gratuity are excluded from taxable pay where the contract runs for at least three continuous years and the gratuity is no more than 31% of the emoluments earned | 1 July 2026 |
| Labour outsourcing (VAT Act s.13) | Salaries, wages and statutory deductions passed on by a labour or placement firm are treated as disbursements | 1 July 2026 |
| Proof of export for imports (new s.23B) | Importers must obtain and keep the export declaration from the country of export for five years | 1 September 2026 |
| Individual return deadline (Income Tax Act s.52B) | Individuals must file by the last day of the fourth month after the year of income, which is 30 April | 1 January 2027 |
KRA confirms the gratuity conditions, the 30 April deadline and the amnesty terms in its own guidance (KRA). Companies and other non-individuals still have until the last day of the sixth month after their accounting period.
The figures below are illustrative, not from a real client.
Amnesty. A company owes KES 400,000 of VAT principal for 2024, plus KES 260,000 of penalties and interest.
| Scenario | Paid by 31 Dec 2026 | Penalties and interest |
|---|---|---|
| Pays the full principal | KES 400,000 | KES 260,000 waived |
| Pays part of the principal | KES 300,000 | Not waived; still owed |
eTIMS penalty. The penalty is the higher of 5% of the tax due and the fixed amount.
| Taxpayer | Tax due | 5% of tax due | Fixed amount | Penalty |
|---|---|---|---|---|
| Company | KES 160,000 | KES 8,000 | KES 100,000 | KES 100,000 |
| Individual trader | KES 400,000 | KES 20,000 | KES 10,000 | KES 20,000 |
KRA's guidance says you should keep screenshots and support tickets when a system fault stops you invoicing, because errors caused by the electronic tax system can qualify for a waiver (KRA). A second summary of the Act is in EY's alert.
If you would like a second pair of eyes on your ledger before the amnesty closes, see our tax and compliance services.
General information only, based on the Act and KRA guidance as at 9 November 2026. It is not tax advice for your situation.
General information, not professional advice. Rules change; check the sources above or ask us before acting. Last reviewed 9 Nov 2026.
Founder of Renol Consulting. Researcher in Mineral Economics and Valuation at the University of the Witwatersrand and Lecturer in Finance and Accounting. About Remmy
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