The National Assembly on Thursday passed the Finance Bill 2026 with a raft of amendments, clearing the way for the legislation to be forwarded to President William Ruto for assent before it becomes law.
The Bill was approved after an electronic vote in which 122 Members of Parliament supported the proposed law, while 40 voted against it. No legislator abstained.
The House had initially adopted the Bill by acclamation.
However, after a section of MPs demanded a division and the constitutional threshold was met, Speaker Moses Wetang'ula directed that an electronic vote be conducted in line with parliamentary procedures.
The passage of the Bill marks the culmination of weeks of heated debate over the government's tax and revenue proposals, with lawmakers scrutinising measures intended to raise additional revenue for the 2026/27 financial year.
During the committee stage, MPs adopted amendments proposed by the Finance and National Planning Committee, including the withdrawal or revision of several contentious tax proposals following public submissions.
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MPs also retained tax reliefs on selected essential goods in response to concerns raised by consumers and industry players.
The Finance Bill 2026 proposes amendments to several tax statutes, including the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Stamp Duty Act.
The changes are intended to broaden the tax base, strengthen compliance and enhance domestic revenue collection to finance government expenditure.
Among the most notable amendments are changes to the Pay As You Earn (PAYE) tax bands, which seek to create a more progressive tax structure for salaried workers.
Under the proposed framework, income falling within the next Sh3.6 million band will be taxed at 27.5 per cent, targeting higher-income earners and creating a clearer distinction between middle and upper-income brackets.
Annual earnings exceeding Sh9.6 million will attract the highest marginal tax rate of 30 per cent, affecting top earners in both the public and private sectors.
The revised PAYE bands are expected to affect more than 3.1 million Kenyan workers whose income tax is remitted to the Kenya Revenue Authority (KRA). If enacted, the new rates will take effect on January 1, 2027, allowing employers adequate time to adjust payroll systems.
The Bill also introduces changes to the definition of royalties by expanding it to include payments made to digital payment card networks and platforms.
The proposal would cover transaction fees, network fees, processing charges and similar payments associated with proprietary digital payment systems, potentially increasing the tax obligations of global card service providers operating in Kenya.
Additionally, lawmakers approved amendments to gambling taxation by redefining "winnings" to specifically refer to payouts from lotteries and prize competitions conducted by entities licensed under the Gambling Control Act, 2025.
Once signed, the Finance Act 2026 will provide the legal framework for implementing the government's tax measures and revenue mobilisation strategy for the coming financial year.