What Has Changed?
The Finance Act, 2026 introduced important changes affecting tax amnesty, withholding tax liability and recovery of unpaid statutory amounts.
1. Section 37E — Tax Amnesty Extended
The tax amnesty framework was extended.
- The qualifying tax debt cut-off date was moved from 31 December 2023 to 31 December 2025.
- The deadline for settling outstanding principal tax was extended from 30 June 2025 to 31 December 2026.
This gives taxpayers with qualifying historical tax liabilities additional time to regularise their tax position without exposure to accrued interest, penalties or fines, subject to the applicable amnesty conditions.
2. Section 39A — Relief Retained
The Finance Bill, 2026 had proposed deleting Section 39A(2). However, this proposal was not retained in the Finance Act, 2026.
The existing relief remains. Where a recipient of a payment has already paid and accounted for the full principal tax, the withholding agent remains protected from being required to pay the same principal tax again.
This prevents double collection of principal tax on the same income.
3. Section 39B — Recovery of Unpaid Amounts
A new Section 39B was introduced. It empowers the Commissioner, when acting as a collector under other laws, to recover unpaid fees, levies or charges using the enforcement mechanisms available for unpaid taxes.
- This extends the tax recovery framework to certain non-tax obligations administered by the Commissioner.
- Where the outstanding amount does not exceed KES 100,000, it may be recovered through a summary process.
Key Takeaway
- The tax amnesty window under Section 37E was extended.
- Protection for withholding agents under Section 39A(2) was retained where the recipient has already paid the principal tax.
- New Section 39B expands recovery powers to cover certain unpaid fees, levies and charges.
Effective date: 1 July 2026, unless otherwise specified in the Act.
Source: Finance Act, 2026 — Sections 37E, 39A and 39B, Tax Procedures Act, Cap. 469B.
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