The Kenya Revenue Authority has received expanded powers to pursue tax obligations from non-residents who earn income in the country, following changes introduced in the Finance Act 2025.

The move, effected through amendments to the Tax Procedures Act, allows the tax agency to target individuals and entities outside Kenya who are liable to pay tax on income sourced locally.

According to the new law, “Section 42 of the Tax Procedures Act is amended  (a) in subsection (1), by inserting the words ‘or a nonresident person who is subject to tax in Kenya’ immediately after the word ‘taxpayer’; (b) in subsection (2) (i) in the opening statement, by inserting the words ‘or the non-resident person who is subject to tax in Kenya’ immediately after the word ‘taxpayer.’”

This adjustment means that the KRA’s authority now covers third-party enforcement mechanisms such as agency notices and financial intermediary obligations even for individuals and businesses that are not physically present or permanently established in Kenya.

Under current tax rules, non-residents are those who do not spend at least 183 days in Kenya within a year and have no permanent base in the country, but they remain liable for taxes on income earned from employment, investments, or business activities within Kenya.

Analysts at law firm Bowmans said the amendment aligns non-residents with the tax collection procedures that already apply to resident taxpayers.

“The amendment expands the KRA’s power to collect tax from third parties by allowing the issuance of agency notices, in respect of non-resident persons who are subject to tax in Kenya. This will enable KRA to compel local agents, payors or financial institutions to remit amounts owed to non-residents directly to the KRA, where tax is outstanding or at risk of non-payment,” they said.

They further noted that the change addresses a gap in enforcing tax compliance, especially for cross-border transactions that involve payments for digital services, royalties, and other forms of income tied to Kenyan sources.

“The change closes a previous enforcement gap and is particularly relevant in the context of cross-border transactions involving digital services, royalties, and other Kenya-source income,” they said.

“It introduces new compliance considerations for businesses and intermediaries making payments to non-residents, who may now be subject to agency action even in the absence of a traditional withholding tax obligation,” the Bowmans commentary added.

However, the Finance Act 2025 did not adopt a proposed clause that would have removed a key safeguard protecting taxpayers who have challenged tax assessments.

The analysts said, “Notably, the Bill (Finance Bill 2025) had proposed to delete the safeguard that prevents the issuance of an agency notice where the taxpayer has appealed an assessment before the Tribunal or court, the Act (Finance Act 2025) has retained this protection.”

“As a result, the KRA is still barred from issuing an agency notice in cases where the underlying assessment is the subject of an active appeal,” they added.