The Finance Act, 2025 is now law. It brings several key changes that could affect how you import goods, trade digitally, or run a business. We’ve simplified the highlights for you and explained what they mean, with practical examples to help you understand the impact.
1. New Requirement: Certificate of Origin for All Imports into Kenya
If you import anything into Kenya, you will now need a Certificate of Origin (CoO) for your shipment to be cleared.
What is a Certificate of Origin?
A CoO is a document from the exporting country that confirms where your goods were made. It must show:
- Exporter and importer names and addresses.
- Description and quantity of goods.
- Port of origin.
- Country of origin and destination.
What’s Changing?
Previously, only goods under trade agreements (like COMESA or EAC) needed this. Now every single import must have one. Let’s say you’re importing electronics from China. Even if you’re not part of a special trade deal, you must now get a CoO from China before shipping. Otherwise:
- KRA won’t clear your goods.
- Your shipment may be delayed.
- You risk penalties or seizure of goods.
It’s meant to prevent tax evasion through fake origin declarations. However, it may increase paperwork and slow down customs clearance
2. Advance Pricing Agreements (APAs) Now Available for Cross-Border Businesses
If your company trades with related entities abroad (like a Kenyan subsidiary selling to its parent company in the US), you can now apply for an Advance Pricing Agreement (APA).
What is an APA?
An APA is a formal deal you make with KRA on how much profit your business should declare from related-party transactions. It helps avoid later disputes about transfer pricing.
Key Points:
- Valid for up to 5 years
- Can be voided if you misrepresent facts
- Applies to both current and future transactions
If your Nairobi-based business buys goods from your sister company in India, you can agree in advance with KRA that your markup will be, say, 15%. This avoids future audits or surprise tax bills. This gives predictability and peace of mind for companies involved in cross-border trade. It’s also a sign that KRA wants more transparency over multinational operations.
3. Digital Asset Tax (on Crypto and NFTs) Has Been Scrapped – But There’s a Catch
Last year, the Finance Act 2023 introduced a 3% tax on digital asset transfers (like crypto or NFTs). That tax has now been repealed. But instead, the Finance Act 2025 introduces a 10% excise duty on platform fees charged for such transfers. If you use a Kenyan-based platform to buy or sell Bitcoin, you won’t pay tax on the transaction value itself anymore. But if the platform charges you KES 500 as a service fee, you’ll pay 10% of that —KES 50 as excise duty.
Why This Matters:
- Good news for crypto traders and NFT creators—less direct tax
- But digital platforms must now charge and remit excise duty
4. Wider Definition of “Digital Lenders”, More Entities Now Taxable
Digital lenders are now defined as anyone offering credit through an electronic platform, even if they aren’t banks.
Who’s Affected:
- Mobile app lenders (like Tala, Branch, etc.)
- Buy-Now-Pay-Later platforms
- Online store credit schemes
Who’s Not Affected:
- Banks (licensed under the Banking Act)
- SACCOs
- Licensed Microfinance Institutions
If you run a small online store and offer customers a 30-day credit facility via M-Pesa, you may now be considered a digital lender and subject to excise duty on interest or fees charged.
5. New Limit on Carrying Forward Tax Losses: Only 5 Years Allowed
Previously, if your business made a loss in a certain year, you could carry that loss forward indefinitely to reduce tax in future profitable years. The Finance Act 2025 has changed this—you now have just 5 years to use up any tax losses.
Let’s say in 2024, your company made a loss of KES 10 million. You must now utilize this loss to offset profits by 2029—or lose the unused portion. This change hits capital-intensive industries like real estate, energy, and manufacturing the hardest. These sectors often post losses in early years due to high start-up and development costs.
However, businesses can apply for more time through KRA and the Cabinet Secretary in exceptional cases.
Final Thoughts
The Finance Act 2025 signals KRA’s continued push towards:
- Greater tax compliance and enforcement.
- More clarity for cross-border businesses.
- Increased oversight over digital finance and trade.
However, these changes may come with new costs, more paperwork, and greater administrative burden, especially for importers, SMEs, and tech platforms.
Written by: Micheal Muya, Tax Lead MMW Advocates LLp