By Alex Kanyi, Partner
NAIROBI, Kenya, Feb 3 – Kenya’s tax framework has undergone rapid and successive changes. Within a short period, the Tax Laws (Amendment) Act 2024, the Tax Procedures (Amendment) Act 2024, and the Finance Act 2025 have all taken effect, with further reforms under discussion through the proposed Business Laws (Amendment) Bill, 2025. The pace of amendment stands in contrast to the National Tax Policy, which envisages a more predictable, multi-year review cycle.
This rising frequency of piecemeal amendments increases planning difficulty for businesses. While the National Tax Policy is not legally binding, it was introduced to guide predictable, medium-term reforms. Regular departures from that framework reduce policy credibility and shorten planning horizons, especially for long-term investment.
The impact on businesses is tangible. Frequent changes complicate forecasting, raise compliance costs and make long-term capital decisions harder to model. Investors generally price tax uncertainty into their decisions, and greater volatility tends to raise the risk premium associated with operating in a jurisdiction.
A recent example illustrates the challenge of such frequent changes. The Finance Act 2021 introduced the indefinite carry-forward of tax losses. The Finance Act 2025, however, reversed this position and reintroduced a five-year cap, without transitional provisions. Capital-intensive industries that take longer to reach profitability now face a risk of expiring losses. The absence of transition rules left taxpayers relying on administrative clarification, heightening uncertainty. International analysis, including OECD commentary, notes that time limits on loss carry-forward can distort investment decisions in sectors with long project cycles.
The repeated breaking of the National Tax Policy’s long-term commitments reflects a deeper structural problem. Kenya’s Medium-Term Revenue Strategy (MTRS) was intended to implement the National Tax Policy in a phased and predictable manner, yet early application shows divergence driven by short-term fiscal pressures. This erodes the distinction between major structural reforms and smaller annual adjustments.
Looking beyond borders, several jurisdictions offer models that Kenya can draw on. South Africa’s medium-term fiscal projections, Rwanda’s alignment of tax policy and administration, and OECD-style review clauses demonstrate how governments can maintain reform momentum while anchoring change in a transparent, multi-year framework.
Kenya could strengthen predictability by grounding the MTRS in legislation or formal guidelines. This would not eliminate change, but it would introduce procedural discipline and require clearer justification for changes. An explanatory memoranda, setting out expected fiscal, economic and investment effects, would also help businesses anticipate how proposed measures may apply to them.
In the meantime, businesses should treat regulatory changes as an ongoing operational risk. Scenario analysis, regular stress-testing of financial models and early review of draft legislative proposals can support timely adjustments. Where uncertainty persists, tools such as private rulings or Advance Pricing Agreements can provide greater clarity. Continued investment in digital compliance tools, including e-TIMS, can further reduce exposure to implementation risk.
Ultimately, durable stability will depend on consistent alignment between Finance Bills, the National Tax Policy and the MTRS, supported by clear transitional rules and fewer abrupt reversals of policy direction. A more transparent and structured reform process would provide the predictability needed to support both compliance and long-term investment planning.
The writer is a Partner, Tax & Exchange Control Practice, Cliffe Dekker Hofmeyr (CDH) Kenya
