KRA Fringe Benefit Tax Rate 2026: Latest 9% Rate in Kenya
The Kenya Revenue Authority (KRA) has increased the Fringe Benefit Tax (FBT) market interest rate from 8% to 9% for October, November and December 2026. The new rate affects employers that provide loans to employees, directors or their relatives at interest rates below the prescribed market rate.
In a public notice dated 22 October 2026, KRA confirmed that the 9% benchmark would apply throughout the fourth quarter of the year. Employers must use the applicable rate when calculating the taxable benefit arising from qualifying staff loans.
It is important to understand that the 9% figure is the prescribed market interest rate used in the calculation. It is not the final Fringe Benefit Tax rate charged on the loan amount.
What Is the KRA Fringe Benefit Tax Rate for 2026?
The KRA Fringe Benefit Tax market interest rate for October to December 2026 is 9%. The rate is prescribed under Section 12B of the Income Tax Act and is used to determine the taxable benefit when an employer lends money at an interest rate below the prescribed market rate.
| Period in 2026 | FBT Market Interest Rate |
|---|---|
| January to March | 8% |
| April to June | 8% |
| July to September | 8% |
| October to December | 9% |
The increase from 8% to 9% means that, other things being equal, a qualifying employee loan charged at the same interest rate may produce a higher taxable benefit during the final quarter of 2026.
Employers should refer to the applicable KRA notice when calculating the benefit for each relevant month.
What Is Fringe Benefit Tax in Kenya?
Fringe Benefit Tax is a tax payable by an employer when a qualifying loan is advanced to an employee, director or their relatives at an interest rate lower than the market interest rate prescribed by KRA.
The arrangement provides a financial benefit because the borrower pays less interest than the prescribed market benchmark. The difference is treated as a taxable fringe benefit.
Fringe Benefit Tax is separate from the ordinary Pay As You Earn (PAYE) deductions on an employee’s salary. The employer is responsible for calculating and paying the applicable FBT.
How Is Fringe Benefit Tax Calculated in 2026?
The calculation starts by subtracting the actual interest rate charged on the qualifying loan from the prescribed market interest rate.
Taxable monthly benefit = Qualifying loan balance × Interest rate difference ÷ 12
This simplified formula assumes that the loan balance remains constant during the month. Actual calculations should account for the applicable loan balance, repayment arrangements and relevant tax rules.
Example: KSh 3 Million Employee Loan
Suppose an employer gives an employee a loan of KSh 3,000,000 at an annual interest rate of 3%, while the KRA market interest rate is 9%.
- Loan balance: KSh 3,000,000
- KRA market interest rate: 9%
- Interest charged to the employee: 3%
- Difference: 6 percentage points
- Annual taxable benefit: KSh 180,000
- Monthly taxable benefit: KSh 15,000
If the applicable FBT tax rate is 30%, the illustrative monthly tax would be KSh 4,500, calculated as KSh 15,000 multiplied by 30%.
This example assumes a constant loan balance and the stated tax rate. Employers should confirm the applicable tax treatment for their circumstances.
Who Is Required to Pay Fringe Benefit Tax?
Employers providing qualifying loans at below-market interest rates are responsible for accounting for Fringe Benefit Tax. The rules can apply to loans provided to:
- Employees receiving staff loans at preferential interest rates.
- Company directors receiving qualifying low-interest loans.
- Relatives of employees or directors where the relevant provisions apply.
- Borrowers whose qualifying employment-related loans remain outstanding after employment ends, where the legislation continues to apply.
Not every loan automatically attracts FBT. Employers should establish whether the loan falls within Section 12B of the Income Tax Act and whether any relevant exclusions or special provisions apply.
When Should Employers Pay Fringe Benefit Tax to KRA?
Fringe Benefit Tax is accounted for monthly. Employers should calculate the taxable benefit for the relevant month and observe the applicable payment deadline, generally the ninth day of the following month.
For example, FBT relating to October 2026 is generally due by 9 November 2026, subject to the applicable statutory rules.
Employers should maintain accurate records of employee loans, interest charged, outstanding balances, monthly calculations and payments made to KRA.
Difference Between Fringe Benefit Tax and Deemed Interest
Although KRA announced a 9% rate for both Fringe Benefit Tax and deemed interest for October to December 2026, the two provisions apply to different circumstances.
| Tax provision | Purpose | Applicable rate or treatment |
|---|---|---|
| Fringe Benefit Tax | Qualifying low-interest loans from employers to employees, directors or their relatives | 9% market interest benchmark for October to December 2026 |
| Deemed interest | Qualifying financing arrangements covered by the relevant provisions of the Income Tax Act | 9% prescribed interest rate for October to December 2026 |
KRA also confirmed a 15% withholding tax on deemed interest, which must be deducted and remitted within five working days under the applicable rules. This withholding tax should not be confused with the calculation of Fringe Benefit Tax on employee loans.
Why Did KRA Increase the Fringe Benefit Tax Rate?
KRA periodically prescribes the market interest rate used to calculate Fringe Benefit Tax. The benchmark helps determine the financial benefit arising when employers lend money at rates below the prescribed market rate.
The rate increased from 8% in July to September 2026 to 9% in October to December 2026. KRA’s notice announced the new rate but did not provide a detailed explanation for the increase.
Businesses should therefore use the officially prescribed rate for the relevant period rather than relying on the previous quarter’s rate.
How to Check the Latest KRA Fringe Benefit Tax Rates
Employers, accountants and tax professionals can check official notices and guidance through the following resources:
- KRA public notice on Fringe Benefit Tax and deemed interest rates
- KRA guidance on taxation of loans to employees
- Official Kenya Revenue Authority website
Frequently Asked Questions About KRA Fringe Benefit Tax Rate 2026
What is the KRA Fringe Benefit Tax rate for October 2026?
The prescribed market interest rate is 9% for October, November and December 2026.
Is Fringe Benefit Tax charged at 9%?
No. The 9% figure is the prescribed market interest benchmark used to calculate the taxable benefit. The final tax payable is calculated using the applicable FBT tax rate on the value of that benefit.
What was the Fringe Benefit Tax rate in September 2026?
The prescribed market interest rate was 8% for July, August and September 2026.
Who pays Fringe Benefit Tax in Kenya?
The employer is responsible for paying FBT on qualifying loans provided at interest rates below the prescribed market rate.
How do you calculate Fringe Benefit Tax on an employee loan?
Calculate the difference between the prescribed market interest rate and the actual rate charged, apply that difference to the relevant loan balance to determine the taxable benefit, and then apply the relevant FBT tax rate.
When is Fringe Benefit Tax payable?
FBT is accounted for monthly and is generally payable by the ninth day of the following month under the applicable rules.
Is the Fringe Benefit Tax rate the same throughout 2026?
No. The prescribed market interest rate was 8% during the first three quarters of 2026 and increased to 9% for the fourth quarter.
Conclusion
The KRA Fringe Benefit Tax market interest rate for October to December 2026 is 9%, following an increase from 8% in the previous quarter.
The change affects employers providing qualifying loans at below-market interest rates. Businesses should review their employee loan arrangements, calculate the taxable benefit using the correct benchmark and pay the resulting tax within the applicable deadlines.
For accurate compliance, employers should consult the latest KRA notices and the Income Tax Act rather than treating the 9% benchmark as the final tax rate.
Information is based on the KRA public notice dated 22 October 2026 and published guidance available as of 26 October 2026.