Key Changes in Finance Bill 2025 & Why It Is Different

Hello Moneymakers, Kubasu here. In this Newsletter, we are covering the recently tabled Finance Bill 2025 as well as President William Ruto’s Madaraka Day speech and how it affects your wallet.

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Key Changes in Finance Bill 2025

Nearly a year after the Gen Z and Millennials protests, President William Ruto’s regime is doing things differently.

On the last day of April, National Assembly's Finance Committee Chairperson, Kimani Kuria, tabled the much-anticipated Finance Bill 2025, which avoided raising taxes, a main catalyst of the protests that led to the collapse of  the Finance Bill 2024.

The Key Highlights

🔷Tax-Exempt From Zero-Rated

The administration has been keen to ensure that the zero-rated products are now VAT tax-exempt. This include raw materials (either produced locally or imported) supplied to pharmaceuticals for the manufacture of medicines, sugarcane from farms to factories, the supply of locally assembled and manufactured mobile phones, the supply of electric bicycles and electric buses, the supply of solar and lithium-ion batteries, and the packaging materials for tea and coffee. 

What This Means to Businesses: Businesses that could apply for tax refunds under the zero-rated law will be unable to do so when products are tax-exempt. The state is keen on sealing this loophole to boost its revenue.

The Quote: "Where a person imports or purchases goods or services which are exempt or zero-rated and the person subsequently disposes of, or uses, the goods or services supplied in a manner inconsistent with the purpose for which the goods or services were exempted or zero-rated, the person shall be liable to pay tax on the goods or services at the applicable rate at the time of disposal or inconsistent use."

🔷Reduced Levy

In the bill, construction industry players won big after the state reduced the Export and Investment Promotion Levy from 17.5 per cent to 5 per cent for some construction materials. Targeted products are semi-finished products of iron, bars and rods of iron or non-alloy steel.

What It Means: If approved, the cost of construction countrywide will reduce significantly. The state itself also wins since it aims to deliver 200,000 affordable units every year.

🔷Tax-free on per diems

Workers who enjoy per diems will smile in the upcoming financial year since up to Ksh10,000 per diems will not be taxed, an increase from the current Ksh2,000.

What This Means to Employees: They will pocket more in per diems.

🔷Tax-Free Pensions

The bill also sought to make all pension gratuity payments tax-free.

Benefits to Retirees: All retired Kenyans will take home more pension as gratuity is a one-time payment made to an employee upon retirement.

🔷Withholding Tax

Individuals supplying goods to public entities have, however, been hit by withholding tax. It was also extended to the sale of scrap metals.

What This Means: Returns will diminish, or the prices of goods supplied and scrap metals will shore up.

Why the Finance Bill is Different

Whereas the bill may be amended before it is passed in Parliament, the 2025 Finance Bill has avoided slapping new taxes on taxpayers, a departure from two previous bills under Ruto's regime. The Finance Bill 2023 included a housing Levy and VAT on fuel, thereby raising Ksh211 billion. In 2024, the bill (now shelved) raised Ksh330 billion on VAT and excise duty increases. (Read more of earlier coverage here)

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Ruto Labour Day Speech Highlights

Yesterday, the Head of State led the nation in marking the 60th Labour Day celebrations and highlighted key achievements of his administration while announcing new plans. Here are the key highlights;

🔵Govt to hire 20,000 teachers in January and has set aside Ksh3 billion for teachers' promotions.

🔵Employers to apply for tax reliefs directly while calculating PAYE instead of burdening workers to apply to KRA.

🔵Since NSSF contributions were increased in 2023, the government has collected Ksh280 billion, equivalent to that collected for 60 years, while at Ksh200 monthly deductions. NSSF targets Ksh1 trillion by 2027.

🔵There was a 40% rise in maize production, and coffee prices tripled from Ksh50 per kilo to Ksh150.

🔵Affordable Housing created 250,000 jobs

🔵200,000 Kenyans secured jobs abroad in 2024.

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More Business Stories

FKE Boss Blocked
Business Daily reports that Federation of Kenyan Employers (FKE) Executive Director Jacqueline Mugo was blocked from addressing Kenyans during Labour Day celebrations. She had prepared a fiery speech demanding housing levy be dropped to 0.5%, tax relief bands be revised to Ksh36,000, and basic food items be zero-rated.

Treasury Seeking to Monitor Business Transactions

The Treasury Ministry, headed by John Mbadi, is seeking to access Kenyans' personal data without needing a warrant, Business Daily has reported. This is an effort to monitor business transactions and expand the tax base.

Banks Oppose CBK Move

The Kenya Bankers Association, which is the umbrella body for banks, has rejected a recent proposal by CBK for the regulator to control lending rates, the Standard has reported. On April 23, the regulator announced that it was looking to review the Risk-Based Credit Pricing Model introduced in 2019.