Sacco Shares vs. Deposits: The 5% Tax Secret Every 2026 Investor Needs to Know

In the Kenyan cooperative sector, your money is split into two "buckets": Non-withdrawable Share Capital (your equity) and Withdrawable Deposits (your savings). In 2026, the Kenya Revenue Authority (KRA) treats these two buckets very differently, and that difference is worth exactly 5% of your gross earnings.

1. The Withholding Tax (WHT) Spread

The Finance Act 2026 maintains a significant incentive for those who hold permanent equity in SACCOs. Here is the breakdown of the current Withholding Tax rates for resident individuals:

• Interest on Deposits (Rebates): Taxed at 15% WHT.

• Dividends on Share Capital: Taxed at 10% WHT.

The "Spread" Explained: For every Ksh 100,000 you earn in dividends, you keep Ksh 90,000 after tax. For the same amount earned in interest on deposits, you only keep Ksh 85,000. Over a decade of compounding, this 5% gap can represent millions in "found money."

2. Why Does This "Tax Gap" Exist?

The government uses the Finance Act 2026 to encourage "Institutional Capital."

• Deposits are liabilities for a SACCO; you can withdraw them (with notice), meaning the SACCO can't rely on them forever.

• Share Capital is permanent equity. It makes the SACCO stable and allows it to fund long-term projects like Affordable Housing and SME Lending.

To reward you for leaving your money in the society permanently, the state "discounts" your tax bill by 5%.

3. 2026 Data: The "Net Return" Reality Check

Let’s look at how this tax secret affects the top performers on the Saccoshares marketplace this year.

As the data shows, the Tax Efficiency Gap makes share capital the undisputed king of passive income. Even if a SACCO offers a high interest rate on deposits, the higher tax bite often makes shares the more profitable asset.

4. Strategic Rebalancing on Saccoshares

Knowing this "5% secret," how should you manage your 2026 portfolio?

1. Maximize Your Share Minimum: Most SACCOs have a minimum share requirement (e.g., Ksh 20,000). Strategic investors exceed this minimum significantly to capture the 10% tax bracket.

2. Dividend Reinvestment: Instead of taking your 20% dividend in cash, reinvest it back into Share Capital. This allows you to compound your wealth at the lower tax rate.

3. The Exit Strategy: If you need to liquidate your high-yield shares, use Saccoshares. Because these shares carry a lower tax burden, they are highly attractive to buyers who understand the Finance Act 2026 advantages.