Kenya raises the fringe benefit and deemed interest rates to 9%

Kenya raises the fringe benefit and deemed interest rates to 9%

22 October 2026: The Kenya Revenue Authority (KRA) has set both the market interest rate for fringe benefit tax and the prescribed deemed interest rate at 9% for October, November and December 2026, up from 8% in the previous quarter. Employers that lend to staff at low or no interest, and anyone liable for deemed interest, need to apply the new rate from 1 October in their payroll and tax calculations.

Not yet independently verified. KRA's October notice confirms both rates at 9% but does not restate the low-interest benefit rate under section 5(2A), which the July notice set at 8%; KRA has not said whether it changes. We will update this when it can be confirmed, and remove this note.

The two rates and what they apply to

• This is the benchmark for fringe benefit tax, which employers pay on the benefit of loans given to employees at below-market interest.
• This sets the deemed interest on certain interest-free or low-interest loans, on which a 15% withholding tax must be deducted and paid to the Commissioner within five working days.

The previous notice, dated 14 July, set both at 8% for July to September and set the low interest benefit rate under Section 5(2A), which applies to employees' own tax on cheap loans, at 8% for July to December 2026. The October notice, dated 22 October and signed by the Commissioner for Micro and Small Taxpayers, covers only the first two. Both notices carry the same instruction on the 15% withholding tax, so only the rate itself has moved.

A rate published three weeks late

Because the notice came out on 22 October, any payroll run or withholding return already prepared for October on the old 8% figure will need correcting. The change is one percentage point, but it applies to the whole value of the loans affected, so for employers with large staff loan books the difference in fringe benefit tax for the quarter is material.

What payroll teams should update

Payroll and HR systems that compute loan benefits automatically need the new 9% market and deemed rates entered for October to December, while keeping the 8% Section 5(2A) rate unless KRA says otherwise. Finance teams should check whether any October deemed interest withholding was paid at 8% and settle the difference. Our payroll software listings include the tools that hold these rate tables.

Sources

• Kenya Revenue Authority: Fringe Benefit Tax and Deemed Interest Rate (public notice 2403), 22 October 2026
• Kenya Revenue Authority: Fringe Benefit Tax, Deemed Interest Rate and Low Interest Benefit (public notice 2379), 14 July 2026