The banking industry in Kenya handed over a historic KSh205.58 billion in taxes for the year 2025, the highest amount ever recorded.
The figure comes from 33 banks and micro-finance institutions and represents a 5.53 per cent rise on the KSh194.81 billion contributed in 2024, according to the Kenya Bankers Association’s Total Tax Contribution Report 2025.
For the first time since the study began, the taxes that banks collected on behalf of the revenue authority topped the taxes that the institutions paid directly, with KSh107.22 billion collected for the government, up 13.24 per cent from KSh94.69 billion a year earlier.
Direct taxes, which include corporate tax and irrecoverable value-added tax, fell 1.77 per cent to KSh98.36 billion from KSh100.12 billion in the previous year.
Withholding tax was the main source of the increase, climbing 29.4 per cent to KSh43.95 billion from KSh33.97 billion in 2024 and moving ahead of employment-related taxes to become the sector’s second-largest tax component.
The surge was linked to the Tax Laws (Amendment) Act 2024, which broadened the definition of royalties and brought more payments within the withholding-tax net.
Under the new rules, withholding tax on royalties jumped 159 per cent, while tax on professional fees rose 292 per cent, reflecting higher spending on core banking system upgrades and related technology.
Interest-related withholding tax also grew by roughly nine per cent, supported by a 9.9 per cent rise in customer deposits to KSh6.12 trillion, providing a larger base for taxable interest payments.
Corporate tax remained the largest single element of the banks’ tax bill, increasing 2.06 per cent to KSh70.84 billion from KSh69.41 billion, even as profit before tax expanded 17.63 per cent.
Irrecoverable VAT fell 10.64 per cent to KSh13.65 billion from KSh15.27 billion, contributing to the dip in directly borne taxes despite higher profitability.
Employment-related taxes rose 6.4 per cent to KSh36.81 billion from KSh34.59 billion, covering PAYE, NSSF contributions, the Affordable Housing Levy and Social Health Insurance Fund deductions.
Excise duty collections recovered, increasing 5.46 per cent to KSh23.90 billion from KSh22.66 billion, a trend the report linked to a rebound in lending activity.
The average annual cost of tax compliance for each participating institution climbed 62.25 per cent to KSh30.99 million in 2025, up from KSh19.10 million the year before.
On average, banks spent KSh20.22 million on external tax advisers and advocates, devoted 103 business hours each month to compliance work and made about 45 tax payments monthly, equivalent to roughly three full-time staff.
“The Total Tax Contribution has been delivered within an increasingly demanding tax compliance environment. In 2025, banks made an average of 45 tax payments each month and devoted approximately 103 business hours per month to tax compliance activities,” said Kenya Bankers Association chief executive officer Raimond Molenje.
Alice Muriithi, partner for tax and legal services at PwC Kenya, said the findings highlight “the need for continued collaboration between policymakers, revenue authorities and taxpayers to simplify reporting obligations, improve the functionality and integration of digital tax platforms, and create a more predictable tax environment.”
Banks rated the difficulty of filing requirements at 3.19 out of five, pointing to the five-day deadline for withholding-tax filing as a major administrative burden.
Frequent legislative changes and reconciliation problems with digital platforms such as iTax and eTIMS have added to operating costs, according to the report.
The Kenya Bankers Association has urged a return to monthly withholding-tax filing cycles, greater automation of compliance processes and better integration and stability of tax platforms.
Between 2018 and 2025, the sector’s total tax contribution more than doubled from KSh99 billion, while net assets grew 89.42 per cent to KSh8.35 trillion and total capital rose 83.52 per cent to KSh1.26 trillion.
