The Finance Bill, 2026 proposed removing a special withholding tax (WHT) exclusion that applied to certain payments made by the national carrier to non-resident companies.
What Was the Exclusion?
Normally, when a Kenyan company makes certain payments to a non-resident, it may be required to deduct withholding tax before making the payment.
However, the national carrier had a specific exclusion for certain specialised services obtained from non-residents, including:
- Technical services
- Aircraft maintenance
- Compliance services
- Training
- Digital systems support
The Finance Bill 2026 proposed deleting this special exclusion.
But the Final Finance Act Took a Different Approach
The Finance Act, 2026 did not simply remove the protection altogether. Instead, it introduced a narrower exemption under Section 35(1A).
Under the new provision, WHT does not apply to certain payments made by a Government-designated national carrier to a non-resident for access to or use of specified:
- Digital platforms
- Payment-card schemes
- Payment networks
- Payment processing systems
- Switching, clearing, and settlement systems
In Simple Terms
The Finance Bill said: Remove the national carrier's special WHT exclusion.
The Finance Act ultimately said: Narrow the exemption and specifically protect certain digital and payment infrastructure payments.
This helps prevent additional WHT costs on important international aviation payment systems.
Important Limitation
This is not an exemption for every airline or every payment. It applies only to a resident air transport operator designated by the Government as a national carrier and only to the specific digital and payment-related services covered by the law.
The Bottom Line
The Finance Act 2026 did not completely remove the national carrier's WHT protection. Instead, it replaced the broader protection with a more specific exemption covering certain digital platforms and payment infrastructure.
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