The Kenya Revenue Authority (KRA) has set the interest rate for fringe benefits and the deemed interest rate at 8 per cent for the second quarter of 2026.
In a notice issued on Tuesday, April 14, 2026, KRA said the new rates will apply for a three-month period covering April, May and June.
“The market interest rate for Fringe Benefit Tax and the Deemed Interest Rate has been set at 8 per cent for the period April to June 2026,” the Authority stated.
Fringe Benefit Tax is charged when an employer provides an employee with a loan at an interest rate lower than the prevailing market rate. It may also apply to non-cash benefits offered by employers, such as vehicles or other perks that are not included in an employee’s gross salary.
The 8 per cent rate will be used to determine the amount of tax payable on such benefits.
The tax is provided for under Section 12B of the Income Tax Act, which came into effect on June 12, 1998. It is calculated based on the difference between the market interest rate and the actual interest paid on the loan.
KRA further noted that in cases where a loan extends beyond the termination of employment, the new rates will still apply.
Deemed interest, on the other hand, applies when an employer gives a loan to a non-employee without charging interest or at a rate lower than the market rate.
“Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the Commissioner within 5 working days.”
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