Kenya: Tax and customs proposals in 2026/2027 budget
Kenya's proposed 2026/2027 budget introduces income tax, VAT, customs, and administrative changes to broaden the tax base and streamline processes.
The Cabinet Secretary for the National Treasury & Economic Planning on June 11, 2026, proposed a series of tax measures as part of the 2026/2027 budget to support economic growth, enhance domestic revenue mobilization, and streamline tax administration.
Income tax and VAT proposals
The income tax proposals would introduce a capital gains tax (CGT) exemption on property transfers to registered real estate investment trusts (REITs), revise return filing timelines based on income type, establish a 60% minimum deemed dividend floor, and expand the definitions of management fees and royalties.
Additionally, a simplified tax regime would be introduced for nonresident landlords, trusts would be taxed at the trustee level, the withholding tax exemption for the national carrier on payments to nonresident service providers would be removed, and resident shipping agents would become responsible for remitting tax for nonresident shipping companies.
Regarding VAT, the proposal would exempt dialyzers and goods or services for approved public-private partnership (PPP) projects. It would also clarify that payment platform services do not qualify for the financial services exemption, and remove VAT exemptions for certain goods, including denatured ethanol, direction-finding compasses, and construction inputs for affordable housing and tourism facilities.
Customs and excise duty proposals
The customs proposals, expected to be published on June 30, 2026, by the East African Community (EAC) Secretariat, would remain in effect until June 30, 2027. These measures include:
- Continued stay of application of a lower tariff on rice and wheat imports
- Extension of the 0% duty remission on inputs for animal feeds and telecommunication device assembly
- 0% duty remission on inputs for manufacturing roofing materials, automotive parts, and cold rooms
- Tariff exemptions for dates consumed during Ramadan in 2027
Proposed reforms under the Excise Duty Act, which would become effective on July 1, 2026, would remove the excise duty on bottled water, introduce a single 25% duty on mobile phone activation, establish a taxation framework for vintage and collector vehicles, and reduce the excise duty rate for undenatured extra neutral alcohol.
Miscellaneous and administrative measures
Other miscellaneous and administrative measures would:
- Exempt imported mobile phones from the import declaration fee (IDF) and railway development levy (RDL)
- Exempt property transfers to approved REITs from stamp duty
- Reintroduce a tax amnesty from July 1, 2026, through December 31, 2026, for liabilities accrued up to December 31, 2025
- Authorize prepopulated tax returns generated by the Kenya Revenue Authority (KRA)
- Exempt foreign investors from obtaining a KRA personal identification number (PIN) solely to open Central Depository And Settlement Corporation (CDSC) accounts
Read a June 2026 report prepared by the KPMG member firm in Kenya