The Kenya Revenue Authority (KRA) has been granted expanded powers to collect taxes from individuals who reside outside of Kenya but are subject to tax in the country.
The Finance Act 2025 has amended the Tax Procedures Act and extended the taxman’s scope beyond resident taxpayers to also include non-resident persons who are subject to tax in Kenya.
“Section 42 of the Tax Procedures Act is amended— (a) in subsection (1), by inserting the words “or a non-resident person who is subject to tax in Kenya” immediately after the word “taxpayer”; (b) in subsection (2)— (i) in the opening statement, by inserting the words “or the non-resident person who is subject to tax in Kenya” immediately after the word “taxpayer”,” the Finance Act 2025 said.
“(ii) in paragraph (a), by inserting the words “or the non-resident person who is subject to tax in Kenya” immediately after the word “taxpayer”; (iii) in paragraph (b), by inserting the words “or the non-resident person who is subject to tax in Kenya” immediately after the word “taxpayer”,” it added.
A non-resident is an individual who does not have a permanent residence in Kenya and who spends fewer than 183 days in the country within a tax year. Non-residents are subject to taxation on the income derived in Kenya, including from employment, business or investments.
Analysts said that the amendment incorporates non-resident persons into all operative provisions governing third-party tax collection, including notices to agents, obligations of banks and other intermediaries, the operation of joint accounts, and the legal effect of payments made by agents on behalf of such persons.
“The amendment expands the KRA’s power to collect tax from third parties by allowing the issuance of agency notices in respect of non-resident persons who are subject to tax in Kenya. This will enable the KRA to compel local agents, payors, or financial institutions to remit amounts owed to non-residents directly to the KRA where tax is outstanding or at risk of non-payment” analysts at law firm, Bowmans said in a commentary.
“The change closes a previous enforcement gap and is particularly relevant in the context of cross-border transactions involving digital services, royalties, and other Kenya-source income” they added.
“It introduces new compliance considerations for businesses and intermediaries making payments to non-residents, who may now be subject to agency action even in the absence of a traditional withholding tax obligation,” the Bowmans commentary further said.
The analysts, however, observed that the Finance Act 2025 retained safeguards that prevented the taxman from issuing agency notices in cases where taxpayers had appealed assessments before a court or the Tax Appeal Tribunal.
“Notably, the Bill (Finance Bill 2025) had proposed to delete the safeguard that prevents the issuance of an agency notice where the taxpayer has appealed an assessment before the tribunal or court, the Act (Finance Act 2025) has retained this protection,” the analysts at Bowmans said in the commentary.
“As a result, the KRA is still barred from issuing an agency notice in cases where the underlying assessment is the subject of an active appeal,” they added.
