KRA Fringe Benefit Tax Calculator

Background.

A company lends its finance manager KSh 3,000,000 at 3% a year to buy a car, at a time when KRA's market interest rate stood at 8%, the rate for July to September 2026. The manager saves five percentage points of interest, worth KSh 150,000 over a year, and Kenyan law treats that saving as a benefit of employment. Under section 12B of the Income Tax Act it is the employer, not the employee, that pays tax on it: fringe benefit tax, worked out each month at the corporate tax rate. In this case that is KSh 12,500 of benefit and KSh 3,750 of tax every month.

The arithmetic is short, but every input has to be the right one. The principal is the balance still outstanding, not the amount first lent. The employee's rate is what the loan agreement actually charges. The market rate is the one KRA publishes in a public notice for each three-month period. KRA's notices set it at 8% for April to September 2026 and at 9% for October to December 2026. The calculator starts with 9%, and the worked example uses the earlier 8%, so check the notice covering the months you are working on before relying on the result. When the employee pays the market rate or more, there is no benefit and the tax is zero; it never turns into a credit.

KRA's own PAYE guidance uses almost the same case to explain the tax: a KSh 3,000,000 loan at 3% with a 9% market rate gives a 6% benefit, KSh 15,000 a month, and KSh 4,500 of fringe benefit tax at 30%. Enter those figures and you get the same answer. The same KRA notices also publish a deemed interest rate under section 16(2)(ja) and a rate for the low interest benefit under section 5(2A); those are separate charges with their own rules, and they are not computed here.

What is kra fringe benefit tax calculator?

Fringe benefit tax is the tax Kenyan employers pay under section 12B of the Income Tax Act when they lend to employees at less than the market interest rate prescribed by the Commissioner. The taxable value is the interest the employee is spared: the loan balance multiplied by the gap between KRA's market rate and the rate actually charged. KRA computes it monthly and applies the corporate tax rate, 30% in its published example, to the monthly benefit. The tax is the employer's cost. It is not withheld from the employee's salary, and it is a different charge from PAYE on the employee's pay.

How to use this calculator.

1. 01Enter the loan balance outstanding for the month in KSh, after any repayments already made, as the field's hint describes.
2. 02Enter KRA's market interest rate from the public notice covering that month. The calculator starts at 9%, the rate KRA set for October to December 2026.
3. 03Enter the annual rate the loan agreement charges the employee; use 0 for an interest-free loan.
4. 04Enter the corporate tax rate that applies to the employer, usually 30%, and the number of months to total, between 1 and 60.
5. 05Read the monthly tax first. Use the months total only where the balance and both rates stay the same for every month counted.

The formula.

Monthly fringe benefit tax = P × max(m − e, 0) ÷ 100 ÷ 12 × c ÷ 100, where P is the outstanding loan in KSh, m is KRA's market interest rate and e the employee's rate, both as annual percentages, and c is the corporate tax rate in percent. The steps follow the order KRA uses. The rate difference m − e is found first and set to zero if the employee pays the market rate or more. Applied to the balance it gives the annual taxable benefit, P × (m − e) ÷ 100. Dividing by 12 gives the monthly benefit, and multiplying by c ÷ 100 gives the monthly tax. The total for several months is the monthly tax times the number of months. Every step is proportional, so halving the balance halves the tax, and each percentage point of rate difference on KSh 1,000,000 adds KSh 250 a month at 30%. The model assumes one balance and one pair of rates for the whole period. Loans that are being repaid, and periods that cross into a new KRA notice, are worked one month at a time and added up.

A worked example.

Frequently asked questions.

References& sources.

1. [1]Kenya Revenue Authority (22 October 2026). Fringe Benefit Tax and Deemed Interest Rate (October to December 2026: market interest rate 9%). KRA Public Notice.
2. [2]Kenya Revenue Authority (14 July 2026). Fringe Benefit Tax, Deemed Interest Rate and Low Interest Benefit (July to September 2026: market interest rate 8%). KRA Public Notice.
3. [3]Kenya Revenue Authority (2026). Fringe Benefit Tax and Deemed Interest Rate. KRA Public Notice.
4. [4]Kenya Revenue Authority (2026). Fringe Benefit Tax, Deemed Interest Rate and Low Interest Benefit. KRA Public Notice.
5. [5]Kenya Revenue Authority. More About PAYE. KRA FAQ.
6. [6]Kenya Revenue Authority. Fringe Benefit Tax.
7. [7]Kenya Revenue Authority. PAYE Guide.
8. [8]National Council for Law Reporting (2024). Income Tax Act, Cap. 470. Kenya Law.