Kenya Revenue Authority announces gratuity tax rules and system integration

The Kenya Revenue Authority (KRA) has announced new guidelines regarding tax exemptions on gratuity payments under the Finance Act 2026. Employees who have served a single employer for at least three continuous years, or are serving an extension of a three-year contract, may qualify for tax-free gratuity. To qualify, the gratuity payment must not exceed 31% of the employee's total earnings during that period of service.

Additionally, the KRA, in partnership with the National Treasury, has implemented an integration between the Electronic Tax Invoice Management System (eTIMS) and the Integrated Financial Management Information System (IFMIS). This digital integration aims to enhance transparency and tax compliance in government transactions. Suppliers conducting business with government entities are now required to generate valid eTIMS invoices that correspond precisely with those submitted through IFMIS to ensure automated validation and reduce procurement inconsistencies.