Kenya’s fringe benefit tax unchanged on low interest rates

The unchanged rate of will be applicable for the next three months through to the December cycle.

The fringe benefit tax is payable by employers who offer loans to their employees at interest rates lower than the market rate.

The rate of tax loosely translates to the difference between the market interest rate and the actual interest rate paid on the loan and whose payments fall on or before the 9th day of the subsequent month.

At the same time, the taxman has retained the deemed interest rate at seven per cent for the period from which withholding tax at the rate of 15% on the deemed interest is deductible and payable to KRA on the 20th day of the month.

The hold of the fring benefit tax rate mirrors the largely unchanged market interest rates on loans across 2021 as the Central Bank of Kenya (CBK) continues to signal low loan charges by leaving its benchmark interest rate unchanged.

According to data from the CBK, the weighted average rates for commercial banks loans and advances have held in and around 12 per cent across seven months to July.

At their lowest, average weighted market interest rates on loans by commercial banks stood at a flat 12 per cent in January and 12.09 per cent at their highest in July.

During the same period, the Central Bank Rate (CBR) has remained unchanged at seven per cent.