The Kenya Revenue Authority (KRA) could soon gain stronger powers to crack down on tax avoidance if proposals in the Finance Bill 2026 are approved.
Under the new plan, KRA will be allowed to override certain tax arrangements used by individuals and businesses if they are found to be aimed at reducing tax unfairly. The authority will be able to review transactions and determine whether they reflect the true economic activity or are simply designed to avoid paying tax.
A key proposal in the bill introduces strict anti-tax avoidance rules. These rules will allow the KRA Commissioner General to ignore any deal that is mainly intended to gain a tax advantage and instead calculate tax based on what should have been paid in a normal situation.
This means taxpayers will no longer rely only on the legal structure of a transaction but also on its purpose and real impact. If a deal is seen as misleading, KRA will have the authority to recalculate taxes and demand the correct amount.
The bill also gives KRA power to use data from multiple sources, including tax returns, audits, electronic systems, and customs records, to assess whether taxes have been properly declared.
In addition, the authority will be allowed to issue new tax assessments for up to five years after a transaction, giving it more time to investigate and recover unpaid taxes.
Another major change is that KRA may issue tax demands even before a taxpayer files returns if it suspects income has been underreported. In such cases, taxpayers will have to respond or challenge the assessment afterward.
Overall, the proposal is aimed at closing loopholes and increasing tax compliance, but it is likely to raise concerns among businesses and individuals about increased scrutiny and enforcement by the tax authority.