Kenya has proposed sweeping value-added tax (VAT) exemptions across multiple sectors under its Finance Bill 2026, in a move aimed at easing costs and стимулировать investment in strategic industries.
The draft legislation, presented by Treasury Cabinet Secretary John Mbadi, expands the list of goods and services eligible for VAT exemption or zero rating, covering health, agriculture, manufacturing, energy and transport.
Among the items proposed for exemption are medical supplies such as dialyzers used in kidney treatment, as well as raw materials for the production of animal feed and pharmaceutical products, subject to government approval.
The bill also targets agricultural value chains, including exempting the transportation of sugarcane from farms to processing factories.
In the energy and transport sectors, the proposed changes include VAT exemptions for electric bicycles, motorcycles, electric buses, solar equipment and lithium-ion batteries, reflecting Kenya’s push toward cleaner energy and mobility solutions.
Telecommunications equipment such as mobile phones for cellular and wireless networks would also qualify for exemption under the proposals.
The legislation further includes tax relief for locally supplied second-hand clothing, although imported used garments would remain taxable.
Kenya is also seeking to incentivise infrastructure development through exemptions on goods and services used exclusively in public-private partnership (PPP) projects, pending approval by the relevant authorities.
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The proposals form part of broader fiscal reforms under President William Ruto’s administration, which has prioritised economic growth while attempting to manage public finances and ease pressure on households.
In the financial sector, the bill maintains VAT exemptions on core money transfer services, including the issuance and receipt of funds and over-the-counter bill payments.
However, it introduces new exclusions targeting fee-based digital payment services such as processing, settlement and gateway services, as well as cash-handling operations like ATM replenishment and cash transportation.
Analysts say the distinction reflects an effort to protect basic financial access while broadening the tax base in rapidly growing digital finance segments.
The bill also proposes new compliance requirements, including rules obliging businesses to adjust input tax claims on goods that later become VAT-exempt before being sold.
Companies would be required to account for such adjustments within the relevant tax period, with any excess input tax payable to the tax authority.
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In addition, the record-keeping period for tax documentation would be extended from two to three years, giving the Kenya Revenue Authority more time to conduct audits.
The Finance Bill is expected to be debated in parliament in the coming weeks, where lawmakers could introduce amendments before it is enacted into law.
If passed, the measures could reshape Kenya’s VAT regime, with potential implications for consumer prices, business costs and investment flows across key sectors of the economy.
