Finance Bill 2026 Extends Tax Amnesty Deadline to December

Finance Bill 2026 Extends Tax Amnesty Deadline to December

The Kenyan government has moved to offer relief to tax defaulters through a proposed extension of the tax amnesty programme, giving individuals and businesses more time to settle outstanding tax obligations without incurring additional penalties and interest.

The proposal, contained in the Finance Bill 2026 tabled by the National Treasury under Cabinet Secretary John Mbadi, seeks to extend the amnesty window to December 31, 2026. The move is part of broader fiscal reforms aimed at enhancing compliance while easing the burden on taxpayers struggling with accumulated arrears.

Under the proposed amendments to Section 37E of the Tax Procedures Act, taxpayers who fully settle their principal tax liabilities accrued before December 31, 2025, will qualify for a waiver on all associated penalties and interest.

“The Commissioner shall not recover any penalty or interest in respect of tax debts where the taxpayer pays the principal tax liability in full within the amnesty period,” states part of the proposed amendment.

The Kenya Revenue Authority (KRA) is expected to oversee the implementation of the programme, with the Commissioner granted powers to waive penalties and interest for compliant taxpayers who meet the outlined conditions.

The extension is also designed to accommodate taxpayers who may not have cleared their principal tax obligations by the end of 2025. For this group, the Bill introduces an application-based framework requiring individuals and businesses to formally apply for amnesty and submit a structured payment plan.

“A taxpayer who is unable to pay the principal tax by the deadline may apply to the Commissioner and submit a payment plan for settlement of the outstanding amount,” the Bill provides.

However, the proposed law sets strict conditions for eligibility. Taxpayers seeking relief must commit to clearing all outstanding principal taxes within the extended timeline and must not accumulate any new tax liabilities during the repayment period. In addition, applicants will be required to sign a formal commitment letter affirming their intention to comply fully with the agreed payment plan.

Crucially, the amnesty will only apply to penalties and interest accrued up to December 31, 2025. Any new penalties or interest arising after this date will not be covered under the waiver.

The Bill further emphasises that the amnesty will be granted only once to qualifying taxpayers, signaling a firm stance by the government on future compliance.

“The amnesty shall be granted only once to a taxpayer who meets the conditions set out under this section,” the amendment clarifies.

Failure to settle outstanding principal taxes by the December 31, 2026 deadline will result in the reinstatement of penalties and interest, with no provision for further extensions.

In a notable exclusion, the proposed amnesty will not apply to penalties imposed under Section 85 of the Tax Procedures Act. These penalties, which relate to tax evasion or avoidance, are typically charged at double the amount of tax avoided and will remain fully enforceable.

Experts view the extension as a strategic effort by the government to boost revenue collection without resorting to aggressive enforcement measures that could strain businesses and individuals. By offering a structured pathway to compliance, authorities aim to encourage voluntary settlement of tax debts while maintaining fiscal discipline.

The proposal comes at a time when Kenya continues to grapple with revenue shortfalls and increasing public expenditure demands, prompting the government to explore balanced approaches to taxation and compliance.

If approved by Parliament and assented to by President William Ruto, the extended amnesty programme is expected to provide a critical window for taxpayers to regularise their tax affairs before stricter enforcement measures take effect.

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Finance Bill 2026 Extends Tax Amnesty Deadline to December