Fresh 1% VAT cut proposal in 2026/27 budget
On 29 January 2026, Treasury officials confirmed the latest budget includes a proposal to reduce the VAT standard rate from 16% to 15%. But that this would be conditional on developments in tax administration and e-invoicing.
Treasury recently held high-level talks with the Kenya Revenue Authority (KRA) on strategies to boost collections without increasing tax rates.
Sept 2024: Kenya’s Treasury Secretary mulls 2% VAT cut to stimulate growth
The Kenyan Treasury Cabinet Secretary has floated a 2% VAT rate cut from 16% to 14%. This would come with a Corporate Income Tax reduction from 30% to 25%.
The tax cuts, the Secretary believes, would stimulate growth sufficiently to help full the lost revenues form the rates reductions. This is part of the 2025 budget planning process, now underway.
Any cut to 16% would put Kenya further behind with neighbouring countries and harmonisation of the country’s VAT with the East African Community member states:
- Uganda: 18%
- Tanzania: 18%
- Rwanda: 18%
- Burundi: 18%
- Ethiopia: 15%
Sept 2023: The ruling Kenya Kwanza coalition has proposed a 2% rise in the standard VAT rate from 16% to 18% in the Draft Medium-term Debt Strategy for the period 2024-25 and 2026-27. The rise would be to help meet the costs of the government’s major spending plans following the passing in June of the country’s largest budget. The country also faces a potential debt crunch in 2024.
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COVID 2020 VAT cut to 14%
The rate was temporarily reduced to 14% on 1 April 2020 to help support businesses and consumers as the COVID-19 pandemic struck in 2020. The African country also reduced its corporate income tax rate from 30% to 25%.
The 8% reduced rate has remained unchanged during the period. This is payable on the following supplies:
- Motor fuel (regular and premium gasoline)
- Aviation fuel
- Gas oil
- Natural gas
