The Kenya Revenue Authority (KRA) issued a public notice on 22 October 2026 setting both the Fringe Benefit Tax Market Interest Rate and the Deemed Interest Rate at 9% for the October‑December quarter.

Employers who provide loans to staff, directors or related parties at rates below the 9% benchmark must treat the interest differential as a taxable fringe benefit.

The employer, not the employee, is liable for fringe benefit tax calculated at 30% of the benefit value, and the tax must be remitted by the 9th day of the month following the month in which the benefit arose.

For example, a KSh 3 million loan at 3% when the market rate is 9% creates a taxable benefit of 6%, equivalent to KSh 180,000 per year or KSh 15,000 per month, resulting in a monthly fringe benefit tax liability of KSh 4,500.

A 15% withholding tax applies to deemed interest under Section 16(2)(ja) of the Income Tax Act, and must be deducted and paid to KRA within five working days of deduction.

Late payment of fringe benefit tax attracts a penalty of 25% of the outstanding amount plus an additional 5% penalty for delayed remittance.

The tax also covers non‑cash benefits such as private use of employer‑provided vehicles, employer‑provided housing, and any benefit valued over KSh 5,000 per month or KSh 60,000 per year.

KRA advises employers to audit existing staff‑loan arrangements for the October‑December period, ensure timely tax remittance, and seek professional advice where obligations are unclear.

The authority indicated that the rates may be reviewed at the start of the next quarter.