The Treasury has unveiled sweeping tax proposals that could see Kenyans pay more when activating mobile phones, collecting betting winnings or trading scrap metal as the government moves to widen the tax base and raise revenue for the 2026/27 budget.
Contained in the Finance Bill, 2026, the proposals seek major changes to income tax, VAT, excise duty and tax administration laws, with the government targeting the digital economy, gambling sector and parts of the informal trade that have largely escaped taxation.
If approved by Parliament, most of the measures will take effect from July 1, 2026, while some digital reporting requirements are expected to begin on January 1, 2027.
The proposals come as Treasury seeks to finance the Sh4.82 trillion budget for the 2026/27 financial year, even as it introduces a number of relief measures for selected sectors.
Among those set to benefit are kidney patients after Treasury proposed VAT exemptions on dialysers and related medical supplies used in dialysis treatment. The move is expected to lower the cost of treatment for patients battling chronic kidney disease.
Imported spare parts for donor-funded vehicles have also been included in the list of VAT-exempt items.
However, farmers and livestock producers could face higher production costs under the proposed changes to VAT treatment on animal feeds and livestock pharmaceutical products.
Currently, the products are zero-rated, allowing manufacturers to claim refunds on input taxes. Treasury now wants the products classified as VAT-exempt supplies, meaning manufacturers would no longer recover input VAT.
The effect is expected to increase the cost of animal feeds and veterinary medicines as the tax burden is transferred to consumers through the supply chain.
Transport services for sugarcane from farms to milling factories are also set to move from the current zero-rated category to VAT-exempt status, a change likely to reduce earnings within the sugar sector.
At the same time, Treasury is proposing aggressive tax measures targeting mobile phone users and traders dealing in imported handsets.
Under proposed amendments to the Excise Duty Act, excise duty on mobile phones will rise from 10 per cent to 25 per cent of the excisable value. The tax will be charged at the point a phone is activated on a mobile network.
The proposal is expected to target smuggled and untaxed phones that dominate the grey market, especially second-hand smartphones imported into the country illegally.
Treasury also wants imported phones expressly included under goods subject to the Import Declaration Fee.
The gambling industry has equally been targeted in the new tax plan. Treasury proposes to formally classify winnings from betting, gaming and lotteries as taxable income under the Income Tax Act.
The Bill retains the current 20 per cent withholding tax on winnings, excluding the amount originally staked by the bettor.
It also expands the definition of excisable betting transactions to include deposits made through chips, tokens, credits and other gaming instruments. If passed, the tax will become payable immediately money is converted into betting credits.
Scrap metal dealers are also among those targeted in the proposed changes.
Treasury plans to introduce a 1.5 per cent withholding tax on the gross value of scrap metal sales while formally classifying income from the business as taxable.
The Bill further broadens the definition of royalty payments to include fees paid for software use, digital marketplaces, payment gateways and related digital services.
For foreign property owners, Treasury is proposing a new final tax regime for non-residents earning rental income from property located in Kenya.
Under the proposed Section 6B of the Income Tax Act, taxes paid by non-resident landlords will be treated as final tax, a move expected to simplify tax administration and improve compliance.
Kenyans filing annual tax returns will also face tighter deadlines.
The Bill reduces the filing period for annual income tax returns from six months after the end of an accounting period to four months. Nil returns will also have to be filed within one month.
Affordable housing consumables have meanwhile been removed from the VAT exempt list.
Under the excise duty proposals, Treasury wants a 5 per cent excise tax imposed on coal and a 50 per cent duty introduced on imported antique, vintage and classic vehicles older than 30 years.
The Bill also raises excise duty on cigars to Sh18,000 per kilogramme and tobacco to Sh12,550 per kilogramme.
Small-scale beer manufacturers could also lose a special lower excise tax rate currently enjoyed by some brewers.
Treasury has additionally introduced proposals touching on crypto assets and digital financial reporting requirements, although the measures could still be amended during debate and consideration by MPs.