The Kenya Revenue Authority announced on 22 October that the market interest rates used to compute Fringe Benefit Tax (FBT) and deemed interest will be 9 per cent for October, November and December 2026, up from 8 per cent in the previous quarter.

Employers who provide employees with loans at below‑market rates must apply the 9 per cent FBT rate when calculating the tax due for the three‑month period.

Similarly, companies granting interest‑free loans or advances to shareholders or connected persons must use the 9 per cent deemed interest rate for the same period.

A 15 per cent withholding tax on deemed interest will also apply for the October‑December window, meaning businesses must deduct and remit this amount in addition to the deemed interest calculation.

Employers are required to deduct the applicable taxes and remit the totals to the Commissioner within five working days, following existing tax regulations.

The rates remain applicable even if a loan’s tenure extends beyond an employee’s termination date, ensuring continuity of tax obligations.

KRA described the adjustment as part of its routine quarterly review of market interest rates, intended to reflect prevailing economic conditions and maintain fairness in tax administration.

The authority did not provide a specific rationale for raising the rates from 8 per cent to 9 per cent, though it noted the change aligns with ongoing tax administration adjustments.