Kenya Revenue Authority(KRA) has introduced an increased rate for the fringe benefit tax, which is applied to loan facilities offered by employers.

The market interest rate, initially set at 9% at the start of the year 2023, has now increased to 15%, the taxman announced today. The new tax rates will be applicable for the months of January, February and March.

“For the purpose of section 12B of the income Tax act, the market interest rate is 15%. This rate shall be applicable for the moths of January, February and March 2024. For purpose of section16(2) (ja) of the income Tax Act, the prescribed rate of interest is 15%.This rate shall be applicable for the months of January, February and March 2024,”KRA said in a statement.

Notably, the loan rate will also affect Kenyans who rely on getting loans at workplaces including directors and bosses themselves and relatives.

“Fringe benefits tax is charged on the taxable value of a fringe benefit provided by an employer in a month and is due and payable on or before the 9th of the following month,”KRA explained.

While the tax targets the employers only, they may forced to increase the interest rate for loans they give at their workplace. As a result, loans given at work will be more expensive than in previous months.

” Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the commissioner within five working days following the computation,” read the notice in part.

Kenya Revenue Authority also set the low-interest benefit rate at 14%, marking an increase of 4 per cent for October to December 2023. President William Ruto assented to the finance act of 2023, introducing a raft of taxes that hit Kenyans hard hence making Kenyan employers to face hard tough times. One of the tax effected on January 1 was the advance tax rate applicable to vans,pick-ups,trucks,prime movers and lorries.

This saw an increase from existing rate of ksh 1,500 per tonne of load capacity to ksh 2,500 or ksh 5,000 per Annum, whichever is higher .