PUBLIC NOTICES 08/06/2026 Filing of 2025 Income Tax Returns

The Kenya Revenue Authority (KRA) has issued a public notice reminding all taxpayers of the June 30, 2026, deadline for filing their 2025 income tax returns. This annual obligation, governed by the Income Tax Act (Cap. 470) and the Tax Procedures Act, 2015, applies to all individuals and entities with a KRA Personal Identification Number (PIN), irrespective of income earned. Legal professionals must guide their clients on timely compliance to avoid significant penalties and interest for late filing or payment. The notice also highlights a temporary concession for the 2025 tax year, allowing the declaration of certain business expenses without eTIMS/TIMS invoices, subject to KRA validation, a critical point for businesses adjusting to new electronic invoicing requirements.

The Kenya Revenue Authority (KRA) recently published a public notice reiterating the statutory deadline for filing Income Tax Returns for the Year of Income 2025. This critical reminder, issued on June 8, 2026, underscores the KRA's commitment to ensuring tax compliance across all sectors. For practising attorneys and legal professionals, this notice is not merely an administrative formality but a crucial directive that necessitates immediate attention and proactive guidance to clients to navigate the complexities of Kenya's tax landscape.

The annual filing obligation is a cornerstone of Kenya's self-assessment tax system, impacting individuals, businesses, and other entities. Failure to adhere to the prescribed timelines and requirements can lead to substantial financial penalties and legal repercussions under the Tax Procedures Act, 2015. This article aims to provide a comprehensive overview of the legal framework, recent amendments affecting the 2025 tax year, and practical implications for practitioners advising clients on their income tax obligations.

The legal framework governing income tax in Kenya is primarily enshrined in the Income Tax Act, Cap. 470 (ITA), which outlines the charge, assessment, and collection of income tax on income accrued in or derived from Kenya. Complementing the ITA is the Tax Procedures Act, 2015 (TPA), which harmonises and consolidates the procedural rules for tax administration, including provisions on filing, payment, objections, and enforcement.

Under this framework, every person with a KRA PIN and an income tax obligation is required to file an annual income tax return. This includes individuals, companies, partnerships, and other entities, even if no income was earned during the year, necessitating the filing of a 'nil' return. The KRA's iTax system, a web-based platform introduced in 2014, serves as the mandatory digital portal for all tax-related processes, including PIN registration, filing returns, and making payments, streamlining tax administration and enhancing compliance.

The deadline for filing 2025 income tax returns for individuals and companies with a December financial year-end is June 30, 2026. Missing this deadline triggers automatic penalties. For individuals, the late filing penalty is the higher of 5% of the tax due or KSh 2,000. For companies and other non-individuals, the penalty is the higher of 5% of the tax due or KSh 20,000. Additionally, late payment attracts a penalty of 5% of the tax due, along with interest at 1% per month on the unpaid tax until it is settled in full.

The 2025 tax year incorporates significant amendments introduced by the Finance Act 2024 and 2025, which practitioners must be aware of. Notable changes include the expansion of the definition of “royalty” to encompass payments for software licences, development, training, maintenance, or support fees. Employment income saw increased tax-free benefits and meal allowances, rising from KSh 36,000 to KSh 60,000 annually and KSh 48,000 to KSh 60,000 respectively. The tax-exempt limit on gratuity payments directed into registered pension schemes also increased from KSh 240,000 to KSh 360,000 per year of service.

Further legislative developments impacting the 2025 tax year include the replacement of the Digital Service Tax (DST) with a Significant Economic Presence (SEP) tax for non-resident persons earning income from digital services in Kenya. A Minimum Top-Up Tax was introduced for multinational groups with consolidated annual turnovers exceeding €750 million, aligning Kenya with global tax standards. The Finance Act 2025 also introduced a 10% Virtual Asset Tax on income derived from the transfer or exchange of virtual assets, and clarified withholding tax on digital content creators (5% for residents, 20% for non-residents). Furthermore, the restriction on carrying forward tax losses for a period of 10 years has been removed, allowing businesses to carry forward losses indefinitely. The residential rental income tax rate for resident persons was also reduced from 10% to 7.5% by the Finance Act 2023, which is applicable to the 2025 year of income.

A crucial, albeit temporary, concession for the 2025 income tax returns is KRA's allowance for taxpayers to declare valid business expenses that may not be supported by eTIMS/TIMS invoices. This is a significant deviation from the general requirement for electronic tax invoices and is subject to KRA validation post-submission. This temporary measure acknowledges the ongoing transition to the electronic tax invoice management system (eTIMS) and provides a window for businesses to regularise their affairs without immediate penalties for non-eTIMS compliant expenses for the 2025 year of income. However, it is explicitly stated that from the 2026 Year of Income onwards, all declared income and expenses must be supported by valid electronic tax invoices.

The KRA's public notice serves as a critical reminder for all taxpayers and their legal advisors to ensure timely compliance with the 2025 income tax return filing obligations by June 30, 2026. Given the automatic and substantial penalties for late filing and payment, proactive engagement is paramount. Practitioners should advise clients to leverage the iTax platform efficiently, ensuring all income sources are accurately declared and relevant deductions and reliefs are claimed, particularly considering the changes introduced by the Finance Acts 2024 and 2025.

Furthermore, the temporary allowance for declaring non-eTIMS/TIMS supported expenses for the 2025 tax year presents a unique opportunity for businesses to regularise their records. However, this should not lead to complacency, as strict eTIMS compliance will be enforced for subsequent tax years. Legal professionals should guide clients not only on current filing requirements but also on preparing for future compliance, including full adoption of eTIMS, to mitigate future tax risks and ensure seamless operations within Kenya's evolving tax regulatory environment.