Kenyan banks paid and collected KES 205.58 billion in taxes in 2025, the first time the sector’s Total Tax Contribution passed KES 200 billion, according to the Kenya Bankers Association (KBA) Total Tax Contribution Report 2025. The figure is 5.53% above the KES 194.81 billion recorded in 2024 and equals 8% of government receipts.
The report is the seventh edition of the study. It covers the year to 31 December 2025 and was prepared with PwC Kenya.
How the report measures bank taxes
The study splits taxes into two groups. Taxes borne are costs that reduce a bank’s own profit, such as Corporate Tax, irrecoverable VAT and withholding tax the bank cannot pass on. Taxes collected are amounts a bank gathers for the government, such as PAYE, withholding tax on payments to suppliers and depositors, and excise duty. Total Tax Contribution is the sum of the two. Readers new to these categories can start with Khusoko’s guide to direct and indirect taxes in Kenya.
Thirty three institutions took part, down from 36 in 2024. Thirty one are commercial banks and two are microfinance institutions. Together they hold 96.9% of the sector’s net assets. PwC says it anonymised and aggregated the data as supplied by KBA members and did not verify or audit it.
| Measure | 2024 (KES billion) | 2025 (KES billion) | Change |
|---|---|---|---|
| Taxes borne | 100.12 | 98.36 | down 1.77% |
| Taxes collected | 94.69 | 107.22 | up 13.24% |
| Total Tax Contribution | 194.81 | 205.58 | up 5.53% |
Taxes collected exceed taxes borne for the first time
Taxes collected reached KES 107.22 billion and passed taxes borne for the first time in the history of the study. The report reads this as a sign that banks act more as tax collection agents than before, and that transaction driven taxes now form a larger part of the sector’s tax footprint.
The sector also contributed 1.80% of Kenya’s tax to GDP ratio of 14.8%, based on the 2025 Budget Policy Statement. That works out to 12.18% of all tax revenue, paid by 33 institutions against about 9.87 million active taxpayers. The foreword signed by KBA Chief Executive Raimond Molenje and PwC Kenya Tax and Legal Services Partner Alice Muriithi says the study shows a contribution “far beyond Corporate Tax.”
Withholding tax moves into second place
Withholding Tax Collected rose 29.40%, from KES 33.97 billion to KES 43.95 billion. It overtook People Taxes Collected to become the second largest component of the total, behind Corporate Tax. The report credits three causes:
- Withholding tax on royalties rose 159% after the Tax Laws (Amendment) Act, 2024 widened the definition of royalty from December 2024.
- Withholding tax on professional fees rose 292%, which the report links to investment by several banks in new core banking systems.
- Withholding tax on interest grew as customer deposits rose 9.9% to KES 6.12 trillion, even though deposit interest expense fell 22.2% to KES 251.4 billion.
Funding costs dropped from 5.7% in 2024 to 3.9% in 2025 as the Central Bank of Kenya lowered its benchmark rate. Khusoko has covered that easing cycle, including the ninth consecutive cut to 9.0% in December 2025.
Corporate Tax grows slower than profit
Corporate Tax borne rose 2.06%, from KES 69.41 billion to KES 70.84 billion. Profit before tax grew 17.63% over the same period, from KES 260.09 billion to KES 305.95 billion.
The report points to government securities. Income from them rose 9.6% to KES 287.2 billion and made up 27.9% of bank income, up from 24.9%. Certain securities, including qualifying infrastructure bonds, are exempt from income tax. Interest income from loans and advances fell 7.5% to KES 500.4 billion, which the report ties to slower credit growth and subdued private sector borrowing.
The banks paid 22.15% of all Corporate Tax collected by the government in 2025, compared with 23.73% in 2024. Government Corporate Tax receipts grew 9.32%, from KES 292.52 billion to KES 319.78 billion, faster than the banks’ own payments.
Payroll taxes: PAYE falls while levies rise
People Taxes Collected rose 6.40% to KES 36.81 billion. PAYE moved the other way, falling 2.98% from KES 31.77 billion to KES 30.82 billion, even though wages paid by the participating banks rose 15.61% to KES 142.44 billion.
The report offers two explanations. The Tax Laws (Amendment) Act, 2024 added a deduction for contributions to post retirement medical funds and raised the annual mortgage interest deduction from KES 300,000 to KES 360,000. The Finance Act, 2025 lifted the tax free daily allowance for staff on official duty from KES 2,000 to KES 10,000 from 1 July 2025.
Statutory deductions drove the increase instead:
- NSSF contributions rose 126.44% to KES 1.74 billion after revised rates took effect on 1 February 2025. Khusoko explained the framework in its report on NSSF contribution rates under Act No. 45 of 2013.
- Social Health Insurance Fund collections rose 221.43% to KES 2.48 billion. 2025 was the first full year after the switch from the National Hospital Insurance Fund in October 2024.
- Affordable Housing Levy collections rose 37.62% to KES 1.60 billion, as 2025 was the first full calendar year of the levy.
Taxes on bank costs decline
Irrecoverable VAT fell 10.64% to KES 13.65 billion. Withholding Tax Borne fell 10.43% to KES 5.35 billion. VAT on imported services fell 17.13% to KES 3.44 billion, and Withholding VAT Borne fell 27.12% to KES 1.17 billion.
General administrative expenses across the sector rose 12.6%, so the report concludes that more spending went to items that attract no VAT, mainly staff pay. It also cites the KBA State of the Banking Industry Report 2026, which shows the cost to income ratio improving from 61.0% to 58.4%.
Banks also paid KES 23.90 billion in excise duty, up 5.46% after a 4.83% fall in 2024. Net loans and advances rose 6.9% to KES 4.35 trillion, and more lending produces more fees that attract excise duty. Khusoko reported average bank lending rates of 14.39% in July 2026.
Banks pay less tax per shilling of profit
The Total Tax Rate, which divides taxes borne by profit before tax, fell from 38.50% to 32.15%. For every KES 100 of profit, banks paid KES 32.15 in taxes borne. Profit before tax grew while taxes borne declined, and the report names the drop in irrecoverable VAT as the main reason for the lower tax bill.
Government keeps the largest share of value distributed
Banks distributed KES 402.26 billion to government, employees and shareholders in 2025, up 13.46% from KES 354.54 billion. The government’s share fell from 54.95% to 51.11%. Employees took 27.75%, up from 25.62%, or KES 111.62 billion. Shareholders took 21.15% as dividends, up from 19.44%, or KES 85.06 billion.
Compliance cost per bank rises 62.25%
Each bank spent an estimated KES 30.99 million on tax compliance in 2025, up from KES 19.10 million in 2024. Banks assigned an average of 2.98 full time staff to tax work, spent about 103 business hours a month on it and made 45 tax payments a month.
The mix of spending changed. Full time compliance staff cost KES 9.76 million per bank, down from KES 13.50 million. External advisers and advocates cost KES 20.22 million per bank. Banks rated the complexity of tax filing at 3.19 out of 5, against 3.27 in 2024.
Respondents named the five day filing and payment cycle for withholding tax as a main strain. They also cited frequent legislative changes and reconciliation problems with the iTax and eTIMS platforms. Khusoko has tracked related rules, including KRA’s one time window to declare expenses without eTIMS invoices. Some banks said the extra requirements improved internal controls, tax governance and reporting accuracy.
The sector asked for four changes:
- A return to monthly withholding tax filing and payment.
- More automation, including pre filled returns.
- Better stability and integration of iTax and eTIMS.
- A more stable and predictable tax law environment.
Contribution doubled since 2018
The contribution grew from KES 99 billion in 2018 to KES 205.58 billion in 2025, a rise of 107.66%. It fell 12.73% to KES 104.83 billion in 2020 during the Covid pandemic, then rose 39.98% to KES 181.27 billion in 2022. By 2025 it stood 71.15% above its 2019 level.
Over the same period, based on Central Bank of Kenya supervision data cited in the report, total capital rose 83.52% to KES 1.26 trillion. Net assets rose 89.42% to KES 8.35 trillion, and deposits rose 87.73% to KES 6.12 trillion. The report states: “Over the period 2018 to 2025, the banking sector’s capital base has strengthened consistently year on year, leading to higher profitability and a greater scale of transactions, which in turn has resulted in a higher Total Tax Contribution.”
What the authors ask for
Molenje and Muriithi wrote that “tax transparency is increasingly recognised as an important element of good corporate governance.” They added: “We trust that the findings will support constructive engagement on how Kenya can protect its revenue base while fostering a tax system that is efficient, predictable and supportive of sustainable economic growth.”
The Kenya Revenue Authority has since reported that revenue reached KES 2.8 trillion in the 2025/26 financial year. More coverage of the sector is in Khusoko’s Banking and Finance section, including the KBA customer satisfaction survey.
