If you use any cloud-based software - accounting platforms, project management tools, CRM systems, or payment gateways - and pay for it in foreign currency, you are likely facing higher costs from mid-2026. The Finance Act 2026 is the reason.
What the Finance Act 2026 Changed
The Finance Act 2026 amended the definition of royalties in the Income Tax Act to explicitly include payments for cloud computing services, SaaS (Software as a Service) subscriptions, and the use of software or digital platforms - regardless of whether the software is downloaded or accessed remotely.
This means that when a Kenyan business pays a foreign company for access to software, that payment is now treated as a royalty. Withholding tax on royalties paid to non-residents is 20% under the standard rules.
Who Pays the Withholding Tax?
You do - the Kenyan business making the payment. You are required to withhold 20% from the gross payment, remit it to KRA by the 20th of the following month, and pay the balance to the foreign supplier. In practice many businesses are simply absorbing the cost, meaning the total cost of the software effectively rises by 25%.
Common Examples Affected
QuickBooks Online, Xero, Sage Business Cloud (accounting). Slack, Asana, Monday.com (collaboration). Shopify, WooCommerce hosted plans (e-commerce). Stripe, PayPal, Flutterwave international plans (payment gateways). All of these now carry withholding tax obligations for Kenyan payers.
What You Should Do
Review your subscription costs and recalculate your true cost of each tool. Check whether the foreign supplier's country has a double tax treaty with Kenya that reduces the withholding rate. Register your WHT obligation on iTax and file monthly returns. Our team has been advising clients on Finance Act 2026 compliance since the Bill was published.