What happened
The Kenya Revenue Authority (KRA) announced on Tuesday that the statutory tax interest rate has been increased to 9% per annum. In the same communication, KRA stated that it will begin strict enforcement of cargo insurance requirements for all importers and exporters operating through Kenyan ports. The decision was disclosed during a press briefing hosted by KRA’s Director of Tax Policy, who emphasized that the measures aim to improve revenue collection and protect cargo owners from loss. The new interest rate applies to all outstanding tax liabilities, including income tax, VAT and customs duties, from the date of the announcement. KRA also warned that non‑compliance with the cargo insurance rule could result in seizure of goods and additional penalties.
Context and background
KRA’s move comes after a series of fiscal adjustments introduced in the 2023/2024 budget, where the government sought to broaden the tax base and curb revenue leakages. Earlier this year, KRA introduced electronic filing mandates and tightened audit procedures for high‑value taxpayers, but the interest rate had remained at 5% since 2020. Industry observers note that the 9% rate aligns Kenya with regional peers such as Tanzania and Uganda, which charge similar rates on overdue taxes. The cargo insurance enforcement is a response to recurring disputes between customs officials and freight forwarders over uninsured shipments that have historically led to cargo loss and revenue shortfalls for the state.
Stakeholders from the Kenya Association of Manufacturers (KAM) and the Kenya Chamber of Commerce (KCC) were consulted during the drafting of the policy, but they raised concerns about the timing, given the lingering effects of the post‑pandemic supply chain disruptions. In a statement aired on Sifa FM Kenya, KRA officials explained that the insurance requirement will be phased in over three months, giving businesses a transition period to adjust their logistics contracts. The agency also pledged to provide an online portal where importers can verify the insurance status of their shipments in real time, reducing paperwork and potential delays at the port of Mombasa.
Historically, KRA has used interest rate adjustments as a lever to encourage timely tax payments. The last increase, from 3% to 5% in 2020, was linked to the COVID‑19 economic recovery plan. Since then, compliance rates have improved modestly, but the government still estimates that roughly Sh30 billion in tax arrears remain unpaid each fiscal year. By raising the rate to 9%, KRA hopes to accelerate collections and narrow the fiscal gap, especially as the country prepares for the upcoming national elections where public finances will be under heightened scrutiny.
Compared with what is normal
Kenya’s previous statutory tax interest rate of 5% was considered low compared with many East African neighbours, where rates typically range from 8% to 12%. The new 9% rate therefore represents a significant upward shift, but it remains within the regional norm. Regarding cargo insurance, the practice of mandating coverage is common in maritime economies such as Singapore and the United Arab Emirates, yet it has been optional in Kenya until now. The enforcement timeline—three months for full compliance—mirrors the rollout periods used in other regulatory changes, such as the 2022 digital tax invoice mandate.
- Previous interest rate: 5% (since 2020)
- New interest rate: 9% per annum
- Cargo insurance: previously optional, now mandatory for all shipments
- Compliance window: three months from the date of announcement
Why it matters
For Kenyan SMEs, the higher tax interest rate translates directly into increased financing costs on any overdue tax balances. A company that owes Sh5 million in VAT and delays payment by six months could see an additional Sh225,000 in interest charges, tightening already slim cash‑flow margins. The cargo insurance requirement also adds a new line item to import and export budgets; insurers typically charge 0.2% to 0.5% of the cargo’s declared value, which can be material for high‑value goods such as electronics or agricultural produce. Moreover, the enforcement mechanism—potential seizure of uninsured goods—creates operational risk for businesses that rely on just‑in‑time inventory models.
On the macro level, the policy is expected to boost KRA’s revenue collection, helping the government meet its deficit reduction targets. However, if businesses struggle to absorb the added costs, there could be a short‑term slowdown in trade volumes, especially for sectors that operate on thin margins like textiles and agro‑processing. The combined effect may also influence pricing strategies, as firms may pass on the higher financing and insurance costs to consumers, subtly affecting inflation dynamics.
Practical steps
- Review all outstanding tax liabilities and calculate the potential 9% interest to prioritise early settlement.
- Contact your freight forwarder or logistics partner to confirm that cargo insurance coverage is in place for every shipment.
- Update your accounting software to automatically accrue tax interest on overdue balances, ensuring accurate financial statements.
- Consider negotiating bulk insurance policies with reputable insurers to secure lower premium rates for regular shipments.
- Monitor KRA’s online portal for real‑time verification of cargo insurance status and stay alert to any notices of non‑compliance.
Our Tax Planning & Compliance service can help you assess the impact of the new 9% interest rate, restructure payment schedules, and ensure that your cargo insurance obligations are met without disrupting your supply chain.
Talk to our team at Beavoren Ventures - info@beavorenventures.co.ke - to set up your systems correctly.
Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.