# Fringe benefit tax in Kenya: who pays it and how much

> An employer that lends to staff below KRA's market interest rate pays 30% tax on the interest saved, declared on the monthly P10 return.

Source: https://itax.ke/articles/understanding-fringe-benefit-tax

When an employer lends money to an employee, a director, or a relative of
either, at an interest rate lower than the market rate, the difference is a
benefit of the job. That benefit is taxed, and the employer pays the tax. This
is Fringe Benefit Tax (FBT), under section 12B of the Income Tax
Act[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_1).

## How the benefit is valued

The taxable value is the interest the loan would have cost at the **market
interest rate**, less the interest the borrower actually
pays[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_2):

```text
Fringe benefit = loan amount × (market rate − actual rate)
```

The tax on that benefit is the resident corporate rate, which is
**30%**[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__para_15).
KRA publishes the market rate in a public notice every quarter. Its notice of
14 July 2026 set it at 8% for July to September
2026[[cite]](https://www.kra.go.ke/news-center/public-notices/2379-fringe-benefit-tax,-deemed-interest-rate-and-low-interest-benefit-7),
and the [FBT rates page](/tools/fbt) keeps the current rate and every one
before it.

Take a Ksh 3,000,000 loan at 3% while the market rate is 8%. The benefit is
5% of the loan, Ksh 150,000 a year or Ksh 12,500 a month, and the FBT on it is
Ksh 3,750 a month.

Where a loan runs past the end of employment, the benefit keeps applying for as long as the loan is
unpaid[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_2).
Loans made on or before 11 June 1998 are outside the charge, unless their terms
have changed
since[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_1).

## Who pays, and when

The employer pays. The Act makes FBT due by the 10th of the month after the
benefit
month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_3),
but it is declared in section D of the P10 PAYE return, and that return is due
by the
9th[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye).
File and pay by the 9th and both dates are met.

## Filing or paying late

FBT goes in with the PAYE return, so a late return costs the higher of 25% of
the tax due or Ksh
10,000[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83).
Tax paid late costs a further 5% of the unpaid
amount[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83A),
plus interest of 1% a month until it is
paid[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_VII__sec_38).