The Finance Act, 2026 has introduced an important investment incentive under the Second Schedule to the Income Tax Act.
What Has Changed?
The Act introduces a 100% investment allowance in the first year of use for qualifying capital expenditure incurred on petroleum or gas storage facilities, where the investment exceeds KES 10 billion.
A qualifying investor may claim the entire qualifying investment allowance in the first year the facility is put into use, instead of spreading the allowance over several years.
Why Does This Matter?
- Reduce taxable income in the first year
- Improve cash flow during the early stages of the project
- Reduce the time taken to recover the tax benefit of the investment
- Make large-scale petroleum and gas infrastructure projects more attractive
What About Industrial Buildings?
The Finance Act also clarifies the treatment of the 10% investment allowance on qualifying capital expenditure relating to industrial buildings.
The 10% allowance is claimable annually in equal instalments. This provides greater certainty on the timing of the deduction and reduces ambiguity over whether the allowance is a one-off claim or should be spread over time.
Important
The 100% first-year allowance is not available to every business. The investment must relate to a qualifying petroleum or gas storage facility and must exceed KES 10 billion.
If your business is planning a major investment in petroleum or gas storage infrastructure, the tax implications should be considered before the investment is made and before the facility is put into use.
Tax Tip
Large capital investments should never be assessed only from an accounting perspective. The timing of tax allowances can have a significant impact on your company's cash flow and tax position.
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