Investment Deduction Calculator Kenya 2026

What the investment deduction is

The Income Tax Act encourages business investment by letting qualifying capital spending be deducted faster than ordinary allowances. For hotel buildings, buildings used for manufacture, hospital buildings and machinery used for manufacture, a company deducts 50% of the cost in the first year of use, then spreads the rest over later years. A larger first-year deduction applies to big projects outside the two main counties.

The higher rate

The first-year deduction rises to 100% when qualifying investment outside Nairobi City and Mombasa counties in the year is at least KES 250,000,000. The law also allows 100% where the cumulative investment over three years outside those counties reaches KES 1 billion, or where the investment is in a special economic zone. This calculator tests the single-year amount and the location only.

The earlier 150% rule

Between July 2022 and December 2024 a 150% deduction applied to investments of KES 1 billion or more. Choose a date in that period in the date box and the calculator applies the rules of the time. From 2025 the first-year allowance above applies.

How the calculator works

You enter the cost of the qualifying building and machinery and choose whether it is in Nairobi or Mombasa county or elsewhere. The calculator picks the highest tier you meet, and reports the deduction and the tax you would save at the tax rate you enter, 30% by default for a company.

A worked example

A qualifying manufacturing building costing KES 250,000,000 outside Nairobi and Mombasa earns a first-year deduction of KES 250,000,000.00. The same cost in Nairobi earns KES 125,000,000.00.

Where it fits in a tax computation

The deduction goes in the company's tax computation, in the same section as capital allowances. Use the capital allowances calculator for the later years. The law prevents a double allowance on the same cost, so ask your accountant how the two interact.

Conditions and evidence

To claim, you need to show the nature of the business, the cost of the asset and the date it came into use. Hotel, hospital and educational buildings must be licensed by the competent authority. Keep invoices, completion certificates and a fixed asset register, because KRA can review claims.

Limits

The qualifying tests are detailed and depend on the nature of the activity. This calculator only tests the amount and the location, and it does not decide whether the asset or the business qualifies. The rates were checked against the Income Tax Act as at 1 July 2026. The result is an estimate for information only, so ask a tax adviser before you plan an investment around it.

Planning around the thresholds

The step from 50% to 100% in the first year is sharp. A project of KES 240 million outside the two main counties earns half of its cost in the first year, while one of KES 250 million earns all of it. If a project sits just below the line, ask whether the qualifying spending can be brought into the same year of income, for example by finishing a second phase before the year ends, and whether the extra cost is worth the earlier deduction. Do not split or combine spending only for tax: KRA can look through arrangements that have no commercial purpose.

Cash flow and timing

A larger first-year deduction does not change the total deduction over the life of the asset. It brings the deduction forward, so it reduces tax in the early years and increases it later. For a company that expects profits in the first year, that improves cash flow. For a start-up that expects losses, a bigger deduction may only enlarge a loss carried forward, which can be used against later profit but only for a limited period. Compare both cases with the corporation tax calculator before deciding how to time the investment.

Records to keep

Keep the board resolution approving the project, contracts, invoices, practical completion certificates and the licence for any hotel, hospital or educational building. Record the date the asset came into use, since the first year of use starts then. Keep these documents for at least five years after the return, which is the period in which KRA can ordinarily review a claim.

Guides, tools and templates for this topic

Read next: Capital allowances are now straight-line: what changed and what it means, Fixed assets and capital allowances explained for small businesses, VAT for small businesses in Kenya: when to register and what to charge

Related calculators: Capital Allowances Calculator, Corporation Tax Calculator, Instalment Tax Calculator

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