The Finance Act, 2026 has introduced an important change to how trust income is taxed in Kenya.
Previously, taxation of trusts could become complicated because income earned through a trust risked being taxed both when received by the trustee and again when distributed to beneficiaries.
The new law simplifies this process.
What Has Changed?
Where income is received by a:
- Trustee
- Executor
- Administrator of an estate
that income is now treated as their taxable income in that capacity.
Once tax has been properly accounted for by the trustee, executor, or administrator, the beneficiaries will generally not be taxed again on the same income. The Act also confirms that qualifying dividends and qualifying interest included in the trust income are not subject to further tax.
Why Is This Important?
- Reduces double taxation
- Makes administration of trusts easier
- Gives certainty to families managing estates
- Encourages more people to use trust structures for succession planning and wealth preservation
Practical Example
The Katheu Family Trust owns rental apartments in Nairobi.
During 2027, the trust earns:
Rental income – KSh 3,000,000
Dividend income – KSh 200,000
The trustee files the trust tax return and pays any tax due.
Later, the trustee distributes KSh 1,000,000 to each beneficiary.
Under the new law:
- The trustee accounts for the tax.
- The beneficiaries receive their distributions without being taxed again on the same income, subject to the provisions of the Act.
This removes unnecessary double taxation and makes estate administration much more efficient.
In Simple Terms
Think of the trustee as a financial manager acting on behalf of the beneficiaries.
Instead of everyone paying tax separately on the same income, the trustee settles the tax first, allowing beneficiaries to receive distributions without another layer of tax on that same income.
Kiswahili: Sheria Mpya ya Kodi kwa Trust
Sheria ya Fedha ya mwaka 2026 imeleta mabadiliko katika utozaji kodi kwa mapato yanayopokelewa kupitia Trust.
Iwapo mdhamini (Trustee), msimamizi wa mirathi (Executor) au msimamizi wa mali (Administrator) atapokea mapato kwa niaba ya Trust, mapato hayo yatatozwa kodi katika ngazi hiyo.
Baada ya kodi kulipwa ipasavyo, walengwa wa Trust hawatatozwa kodi tena kwa mapato hayo hayo.
Mfano
Trust ya familia imekusanya mapato ya kodi ya nyumba.
Mdhamini analipa kodi kwa mujibu wa sheria.
Baadaye anawagawia wanufaika fedha hizo.
➡️ Wanufaika hawatalipa tena kodi kwa mapato yale yale kwa sababu tayari kodi imelipwa kupitia Trust.
Hii inapunguza utozaji kodi mara mbili na kurahisisha usimamizi wa mali za familia.
Tax Home Kenya Insight
Trusts are becoming an increasingly valuable tool for:
- Estate and succession planning
- Protecting family wealth
- Managing property for minors
- Supporting persons with disabilities
- Long-term investment planning
The Finance Act 2026 provides greater certainty on how these arrangements will be taxed, making trusts a more attractive option for Kenyan families and businesses.
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