Kenya has unveiled a suite of tax incentives aimed at boosting agricultural exports, signaling a renewed government push to strengthen the country’s position in global horticultural markets. The measures, announced by the Ministry of Agriculture, form part of the 2026 Finance Bill, which will be reviewed by Parliament in March.
At the core of the package is a halving of the value-added tax (VAT) on agricultural inputs to 8 percent, designed to reduce production costs for farmers and agribusinesses. The VAT cut covers fertilizers, seeds, machinery, and other key inputs, which have historically represented a significant portion of costs for smallholders and commercial producers alike.
In addition to the VAT reduction, the government plans to remove excise duties and export promotion taxes on packaging materials used by horticulture exporters. Packaging, particularly for fruits, vegetables, and cut flowers, has been identified as a key cost bottleneck in the export supply chain. By reducing these levies, authorities hope to improve the competitiveness of Kenyan products in European, Middle Eastern, and regional African markets.
Officials also plan to accelerate VAT refunds through offset mechanisms, easing liquidity pressures on exporters. Firms operating solely for export will receive tax treatment equivalent to that of operators in export processing zones (EPZs) and special economic zones (SEZs), including exemptions on local purchases. These moves aim to align Kenya’s regulatory environment with international best practices and attract additional investment into high-value agricultural sectors.
“These reforms should unlock billions of shillings in capital currently tied up with exporters and accelerate investment across horticulture, tea, coffee, and livestock value chains,” the ministry said in a statement. “The initiatives are intended to strengthen Kenya’s competitiveness and consolidate its position as an African horticultural powerhouse.”
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Kenya’s agricultural sector has shown strong growth in recent years. Tea export revenues, for example, rose nearly 45% over three years, reaching $1.46 billion in 2023, up from $1 billion in 2020, according to data from the Kenya National Bureau of Statistics. Coffee, flowers, and other horticultural products have similarly expanded in volume and value, with exports increasingly contributing to foreign exchange earnings and rural employment.
Analysts say the new measures could further accelerate the sector’s expansion by lowering operational costs and improving cash flow for exporters. Reduced tax burdens on inputs and packaging, combined with faster VAT refunds, are expected to incentivize investments in modern processing and logistics infrastructure, boosting productivity and quality for international markets.
The tax relief package also comes at a time when Kenya is seeking to diversify its export base and reduce reliance on traditional commodities. By facilitating access to global markets for horticultural and other agricultural products, the government aims to increase foreign earnings, strengthen rural incomes, and create new jobs across the value chain.
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Challenges remain, however. Higher fuel costs, transport bottlenecks, and climate-related risks continue to affect farm-level productivity. Analysts note that the success of the VAT cut and other measures will depend on efficient implementation, transparency in VAT refunds, and the government’s ability to support supply chain logistics.
Nevertheless, the incentives signal a broader policy shift toward targeted interventions designed to unlock growth in strategic sectors. By reducing the tax burden on agricultural exporters and encouraging investment in high-value crops, Kenya seeks to enhance competitiveness, attract foreign capital, and sustain long-term economic development.
Officials emphasised that the Finance Bill will provide a clear legal framework for these incentives and ensure that domestic and international investors can plan with certainty. “These measures are a demonstration of Kenya’s commitment to creating a conducive business environment while supporting inclusive economic growth,” the ministry said.
With the VAT cut, removal of packaging taxes, accelerated refunds, and EPZ-style treatment for export-oriented firms, Kenya’s agricultural sector is positioned to maintain strong growth, attract investment, and expand its footprint in global markets in 2026 and beyond.
