The Finance Bill, 2026, details the tax proposals the government is keen on implementing for the 2026/2027 Financial Year.
The Bill contains major tax proposals that will affect the taxation of items including mitumba, fruit juice, scrap metal, among others.
Kenyans will also see major changes in the traditional timelines for filing taxes as the Bill sets April as the new deadline for those with income and January for those filing Nil returns.
As detailed in the Bill, foreigners also face a rental income tax for income earned through the occupation of property in Kenya.
Here are the major tax proposals in the Bill;
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Tax on the importation of mitumba
Finance Bill 2026 introduces a tax on income derived from the importation of worn clothing and footwear, popularly known as Mitumba.
The taxable profit is deemed to be 5% of the customs value.
"The tax payable under this section shall be due and payable upon importation and prior to the release of the goods and shall be a final tax in respect of the income," read the Finance Bill in part.
Filing of tax returns
The government is also introducing major changes to the filing of tax returns, whose deadlines are currently June 30.
As proposed in the Finance Bill 2026, income tax returns must be submitted by the last day of the fourth month (April) following the end of the year of income.
Those filing Nil returns will be required to submit their returns within one month after the end of an accounting period.
For instance, if passed, those filing Nil returns for January to December 2026 will have to file their returns by the end of January 2027.
Withholding tax on scrap metal and gambling winnings
The Bill also introduces the imposition of Withholding Tax on the sale of scrap metals and winnings from gambling.
The rate for scrap metals will be 1.5 per cent of the gross amount, while the rate for winnings will be 20%.
Value Added Tax exemptions
The Bill also proposes VAT exemptions for several items, including human and animal blood, dialysers, scrap metal, and raw materials for the manufacture of animal feeds and pharmaceutical products, subject to approval or recommendation by the relevant Cabinet Secretaries where applicable.
The supply of electric buses and bicycles, as well as imported or locally purchased telephones for cellular and wireless networks, is also exempt from VAT.
Additionally, goods and services for the exclusive use in public-private partnership (PPP) infrastructure projects will be exempt upon approval.
Excise duty on vintage vehicles
Finance Bill 2026 also proposed the imposition of an Excise Duty for a motor vehicle whose year of first registration is at least thirty years before the date of purchase of the motor vehicle and whose value is at least Ksh10 million exclusive of depreciation.
The proposed rate is 50% of the excisable value.
New excise duty rates for fruit juice and phones
Fruits and vegetable juices not containing any added spirit, as proposed in the Bill, will face an Excise Duty of KSh14.14 per litre.
On the other hand, fruits and vegetable juices containing sugar and sweetening matter will face an Excise Duty of KSh20 per litre.
Further, the Bill proposes a 25% excise duty for telephones for cellular and wireless networks, with the tax liability arising at the point of activation of the phone.
Non-resident rental income tax
The Finance Bill proposes the introduction of a Non-Resident Rental Income Tax that will be imposed on non-resident persons earning income from the use or occupation of property in Kenya.
This will be a final tax at a rate specified in the Third Schedule, which the Bill proposes to set at 10 per cent.
"A non-resident person subject to the tax payable under subsection (1) shall register and account for the tax through a simplified registration framework prescribed by the Commissioner; and submit a return and pay the tax due on or before the 20th day of the month following the end of the month for which the rent is paid," read the proposal in part.
Tax exemption for an employee's gratuity payment
For employees, contributions to a gratuity are exempt from tax if the contract is for at least three continuous years and total contributions do not exceed 31% of the basic salary.
Taxation on income from trusts
Equally, the Bill proposes that income received by a trustee, executor, or administrator is deemed the income of that person, and once tax is paid at the trust level, beneficiaries are not liable for further tax on that income.
"Dividend or interest which is included in the income of the trustee, executor or administrator under subsection shall not be subject to further tax under this Act," proposed the Bill in part.
"Where a trustee, executor or administrator has paid tax on the chargeable income of the trust, a beneficiary of the trust shall not be liable to pay tax on that income."
Corporate tax
The Bill also reduces the rate of Corporate Tax for foreign companies from 37.5% to 30%.
"The Ninth Schedule to the Income Tax Act is amended in paragraph 7 in subparagraph (3), by deleting the words 'thirty-seven and a half percent' appearing in item (b) immediately after the words 'non-resident company' and substitute therefor the words 'thirty percent'," read the Bill in part.
The non-resident tax rates for repatriated income by a contractor shall also be 15%.
Tax policies on crypto
In the new proposal, virtual asset service providers that facilitate exchanges or provide trading platforms must file an annual information return on their users.
The Bill also provides that Kenya may enter into international agreements for the automatic exchange of data regarding virtual asset transactions.
