Statutory Changes in NSSF Bands and other tax reforms
Introduction
If not everything, then most of the things under the sun must surrender to change. Changes have been witnessed in laws and legal frameworks, climate, business directions, and even at personal life level; lifestyle and all. Changes are necessary, and sayings and quotes have been made, even in time no one of us existed-change is inevitable, to precisely state, no one can indeed stop a change. We are therefore summoned to embrace changes.
With effect from February 2026, the government of Kenya has implemented new changes in the Payroll, Yes, your pay slip will be slightly altered, and the net amount payable may slightly change.
Here are some of the changes in Tax and Payroll:
NSSF Band Increase
The NSSF Act 2013, has entered its final year of phased implementation, raising the Lower Earnings Limit to KES 9,000 and Upper Earnings Limit to KES 108,000, maximum contribution being KES 12,960 for both Tier I and Tier II. This is from the previous rate where the Lower Earning Limit was KES 8,000 and the Upper Earning Limit KES 72,000, maximum contribution amounting to KES 8,640 for both Tier I and Tier II. The rate still remains at 6% of the Gross salary.
Fringe Benefit Tax:
The prescribed rate for Fringe Benefit Tax and low-interest loans is set at 8% for the first half of 2026, down from 9% in the previous year.
VAT Refund Changes:
The window to claim VAT refunds remains 24 months from the date of tax invoicing.
Corporate Income Tax & Levies
The standard rate shall still remain 30%, the old levies shall still apply to specific sectors: 30% for real estate developers, 30% for financial institutions, and 1. 5% Digital Service Tax (DST).
Tax Loss Carryforward
The 5-year cap has been reintroduced on carryforward of tax losses for corporate institutions.
Proposals in 2026
Proposed reduction by the CS Treasury, of corporate income tax to 28% and restructuring of PAYE, potential exemption for income below KES 30, 000 is strongly probable.
In need of Payroll services?
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Tel: +254 20 2249 100/11 +254 720 021 253 | Email: info@scriberegistrars.com
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