Withholding tax collections jumped 29.4 per cent to Sh43.95 billion from Sh33.97 billion in 2024, overtaking employment-related taxes Kenya Bankers Association CEO Raimond Molenje. /FILE Kenya’s banking sector contributed a record Sh205.58 billion in taxes in 2025, driven by a sharp rise in withholding tax that pushed the industry’s total tax contribution above the Sh200 billion mark for the first time.
The contribution by 33 banks and microfinance institutions rose 5.53 per cent from Sh194.81 billion in 2024, according to the Kenya Bankers Association’s Total Tax Contribution Report 2025. The report shows that taxes collected by banks on behalf of the government exceeded taxes directly borne by the lenders for the first time since the study began.
Banks collected Sh107.22 billion in taxes during the year, a 13.24 per cent increase from Sh94.69 billion in 2024. Taxes directly borne by the institutions, including corporate tax and irrecoverable value added tax, declined 1.77 per cent to Sh98.36 billion from Sh100.12 billion.
“The Total Tax Contribution has been delivered within an increasingly demanding tax compliance environment. In 2025, banks made an average of 45 tax payments each month and devoted approximately 103 business hours per month to tax compliance activities,” said Kenya Bankers Association CEO Raimond Molenje.
Withholding tax emerged as the biggest driver of the increase in revenue remitted to the government. Withholding tax collections jumped 29.4 per cent to Sh43.95 billion from Sh33.97 billion in 2024, overtaking employment-related taxes to become the second-largest component of the banking sector’s total tax contribution.
The increase was partly driven by changes introduced under the Tax Laws (Amendment) Act, 2024, which expanded the definition of royalties and brought a wider range of payments within the withholding tax framework. Withholding tax collected on royalties increased 159 per cent, while collections on professional fees surged 292 per cent.
The latter reflected increased spending by banks on core banking system upgrades and related technology infrastructure.