NAIROBI, Kenya — Treasury Cabinet Secretary John Mbadi has proposed sweeping changes to Kenya’s tax filing regime that would require millions of taxpayers who file nil returns to submit their annual declarations much earlier than the current June 30 deadline.
Presenting the 2026/27 Budget Statement in Parliament on Thursday, Mbadi said the reforms are intended to give the Kenya Revenue Authority (KRA) adequate time to verify and validate tax returns before the commencement of a new financial year.
Under the proposed amendments, individuals filing nil returns would be required to submit their returns within one month after the end of the year of income. Salaried employees whose earnings are fully taxed at source through the Pay As You Earn (PAYE) system would be required to file their returns within four months after the end of the year.
Other categories of taxpayers would continue filing their annual returns by June 30.
“Currently, the deadline for filing tax returns is June 30 of every year for all categories of income, which leaves no room for verification and validation of filed returns before the commencement of another financial year,” Mbadi told Parliament.
“To provide sufficient time for verification and validation of returns, I propose revisions to the timelines for filing individual income tax returns.”
The proposal marks a significant shift from the current framework, under which all taxpayers, regardless of income category or filing status, are required to submit returns by the same deadline.
If approved by Parliament, the changes would affect millions of Kenyans who annually file nil returns to remain compliant with tax regulations despite having no taxable income.
The filing deadline reforms form part of a broader package of tax administration measures unveiled in the 2026/27 Budget, with the government focusing on improving revenue collection efficiency rather than introducing new taxes.
Mbadi emphasized that the Treasury had deliberately avoided increasing tax rates or imposing fresh taxes on households already grappling with economic pressures.
“I have deliberately chosen not to introduce new taxes or increase tax rates that would further overburden hardworking Kenyans and their families,” he said.
“Instead, the measures are focused on reforms that improve efficiency in tax collection, create fairness in the tax system and broaden the revenue base without burdening wananchi.”
The Treasury is also proposing new measures targeting offshore transactions involving Kenyan assets. According to Mbadi, existing loopholes allow some gains arising from offshore transfers to escape taxation when transactions are structured through foreign entities.
The proposed amendments would ensure that gains derived from assets located in Kenya remain taxable regardless of where the transaction takes place or where the beneficial owners are domiciled.
In another major reform, the government plans to curb the prolonged retention of corporate profits by introducing a minimum deemed dividend distribution threshold of 60 per cent of undistributed income.
Mbadi said some companies have been indefinitely retaining earnings to defer dividend tax obligations, denying the government legitimate revenue.
The Treasury is further seeking to clarify the taxation of software-related payments, interchange fees and merchant service charges as Kenya’s digital economy continues to expand.
Additionally, winnings from gambling, lotteries and prize competitions could soon attract withholding tax under the proposed reforms.
“Gambling activities have grown significantly in recent years, particularly through digital platforms. While these are legitimate activities, winnings from gambling are income, and like any other income, they should be taxed,” Mbadi said.
