Kenya proposes 8% cut on input VAT for agri exporters under finance bill 2026

KENYA – Kenya plans to reduce input value added tax for agricultural exporters by 8 percent, lowering the rate from 16 percent, under proposals in the Finance Bill 2026. The government expects to table the bill in Parliament in March.

The proposal targets exporters in horticulture, tea, coffee, and livestock, with the aim of easing cost pressure and improving competitiveness in global markets.

The Finance Bill also proposes removing excise duty and export promotion levies on packaging materials. It would allow faster VAT refunds through offsetting and extend preferential tax treatment to long-standing exporters who sell all their output abroad.

Under the proposal, these exporters would not pay VAT on local purchases, similar to firms operating in Export Processing Zones and Special Economic Zones.

The bill also supports expansion of air freight capacity through Kenya Airways and other international carriers to strengthen agricultural exports.

Support for exporters and cash flow

Agriculture Cabinet Secretary Mutahi Kagwe said the measures respond to financial strain that exporters face, especially delays in VAT refunds and high statutory charges.

“These reforms will help exporters manage cash flow and reduce the burden created by delayed VAT refunds and multiple charges,” Kagwe said.

He spoke during the launch of Flamingo Group Investments’ expansion project in Naivasha. Kagwe said the government had already paid part of the company’s outstanding VAT refund.

“The government has paid Sh470 million [about US$2.94 million] out of Flamingo’s Sh1.8 billion [about US$11.25 million] VAT refund backlog, and more payments will follow,” he said.

Industry players say delayed refunds and high taxes have limited their ability to invest, expand production, and compete in export markets.

Wider impact on the export sector

If Parliament approves the Finance Bill, exporters across several agricultural value chains could benefit from lower operating costs and improved liquidity. Analysts say the proposed tax relief could strengthen Kenya’s position in international markets, where price competitiveness and reliable supply remain critical.

The government believes the package of tax measures and logistics support will help exporters stabilise operations and plan for growth, especially at a time when global demand and freight costs remain uncertain.

Officials also expect the expansion of air freight capacity to reduce delays and improve access to key markets in Europe, the Middle East, and Asia.

The Finance Bill 2026 now awaits debate in Parliament, where lawmakers will review its fiscal impact and implications for government revenue. If approved, the changes could take effect in the next financial year, marking a significant shift in how Kenya supports its agricultural export sector.

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