The Finance Act 2026 signed by President William Ruto on June 23 exempts banks, SACCOs and other lenders from VAT on the sale of repossessed collateral.
The amendment adds the sale, disposal or realisation of repossessed assets to the list of exempt financial services under the VAT Act. It resolves a dispute in which the Kenya Revenue Authority had sought 16 per cent VAT on such transactions.
The Tax Appeals Tribunal ruled in January 2025 that the recovery process was not explicitly covered by the exemption for loan principal. The Kenya Bankers Association had warned in May that the tax would raise lending costs and be passed on to borrowers.
Borrowers are now expected to avoid those extra charges. The change took effect with the signing of the Finance Act 2026 on June 23.
