Kenya Tax Amnesty 2026: A Final Opportunity to Clear Outstanding Tax Penalties

The Kenya Revenue Authority (KRA) has re-introduced the Tax Amnesty Programme under the Finance Act, 2026. This gives individuals, companies, partnerships, trusts, and non-resident persons with outstanding tax obligations a final opportunity to clear historical tax debt. The revamped programme took effect on 1 July 2026 and runs until 31 December 2026.

Background

The tax amnesty was first introduced through the Finance Act, 2023, which inserted Section 37E into the Tax Procedures Act, 2015. It allowed taxpayers who settled their outstanding principal tax to have all associated penalties and interest automatically waived. The programme initially ran from September 2023 to 30 June 2024. Given its strong uptake, it was extended through the Tax Procedures (Amendment) Act, 2024 to 30 June 2025, with coverage widened to include historical tax periods up to 31 December 2024.

Across these two phases, KRA reported that the programme successfully recovered approximately Kshs. 80.9 billion in principal tax payments while regularising thousands of taxpayers across the country.

Given the significant revenue this yielded for the Exchequer, and recognising that a number of businesses had outstanding principal debt but insufficient cash flow to settle it in full within the original window, the Government has extended the amnesty through the Finance Act, 2026. This extension is intended to encourage further voluntary compliance, reduce the backlog of unresolved tax liabilities, and give taxpayers one final, legislated opportunity to regularise their affairs before enforcement measures are intensified.

Key Features at a Glance

Who Qualifies

The amnesty applies broadly across taxpayer categories and tax heads. To qualify, a taxpayer must:

• Have outstanding principal tax that accrued on or before 31 December 2025.
• Fully settle the outstanding principal tax by 31 December 2026 (either in a lump sum or under an approved payment plan).
• Be a taxpayer of any type: individual, partnership, company, trust, or non-resident person with Kenyan tax obligations.
• Have liabilities falling under any of the following tax heads: Pay As You Earn (PAYE), Value Added Tax (VAT), Corporation Tax, Withholding Tax (WHT), Capital Gains Tax (CGT), Excise Duty, Monthly Rental Income Tax (MRI), Turnover Tax (TOT), Digital Service Tax (DST), and Significant Economic Presence Tax (SEPT).

Important Note: Taxpayers who have no outstanding principal tax, but have accrued penalties and interest on their ledger, qualify for the amnesty automatically. They do not need to submit any application; the waiver applies to them without further action.

Key Exclusions

• Tax liabilities, penalties, or interest arising on or after 1 January 2026 are not covered and remain fully due.
• Principal amounts currently under active litigation are excluded from automatic relief.
• Penalties imposed under Section 85 of the Tax Procedures Act (tax avoidance penalties) are excluded from any waiver.
• The amnesty is granted once only to a qualifying taxpayer; there may be no further relief for principal tax that remains unpaid after 31 December 2026.

What This Means for Businesses

This extension is a significant, time-bound opportunity for businesses to clean up their tax position. In practical terms, it means:

• Cash-flow relief: Businesses only need to fund the principal tax owed, without the burden of accumulated penalties and interest, which can substantially reduce the cost of settling legacy tax debt.
• Restored compliance status: Regularising tax affairs enables a business to obtain or renew its Tax Compliance Certificate, often a prerequisite for government tenders, bank facilities, licences, and immigration processes.
• Reduced audit and enforcement risk: Clearing historical liabilities before the window closes lowers exposure to KRA’s expanding digital compliance and audit programmes.
• A genuinely final window: Having now been extended for a third time, this window carries a clear signal that no further extension should be expected. Businesses that fail to settle their principal tax by 31 December 2026 will therefore face the full weight of accumulated penalties and interest, with no further relief pathway available to them.
• Planning considerations: Only pre-2026 principal tax qualifies; liabilities accruing from 1 January 2026 onward are not covered and should be managed under normal compliance timelines.

Frequently Asked Questions (FAQs)

Can I pay in instalments?

Yes, subject to KRA approval of a payment arrangement. Principal tax must still be fully settled by 31 December 2026.

Does the amnesty cover VAT?

Yes, provided the outstanding principal VAT accrued on or before 31 December 2025.

Can businesses currently under audit qualify?

Eligibility depends on the specific circumstances of the audit and whether a definitive principal tax liability has been established. We recommend a case-by-case review.

Will there be another extension?

Businesses should not assume there will be any further extension. This is expected to be the final legislated window.

How MGK Consulting Can Help

Navigating the amnesty and securing approvals on the iTax portal requires a well-structured plan. Our experienced tax team can assist your business to:

• Review your iTax ledger and reconcile outstanding principal tax across all applicable tax heads.
• Confirm eligibility and identify any excluded liabilities (such as amounts under active litigation or Section 85 penalties).
• Prepare and file any outstanding returns required to establish the correct principal tax position.
• Structure a feasible payment plan with KRA if full settlement in a single payment is not possible.
• Process the amnesty application and manage all correspondence with KRA through to successful resolution.

With the window closing on 31 December 2026, we highly encourage businesses to begin the review process early rather than waiting for the year-end rush, when iTax system queues and payment-plan approvals typically experience delays.

For support, please reach out to our Tax Services Team through enquiries@mgkconsult.co.ke.

Contributors: Jeremy Mvera & Daniel Muhia

Disclaimer: This publication provides general information only and should not be relied upon as professional tax advice. Specific advice should be sought based on individual circumstances.