Kenyans to Feel the Impact: Major Tax Changes Proposed on Phones, Fuel and Tobacco
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The Finance Bill 2026 plans to adjust excises and VATs on fuels, mobile phones, tobacco, alcohol, among other products, in order to reduce the burden in some areas while at the same time increasing the levy on others.
Road Maintenance Levy Fund Act will be changed to ensure the allocation to the Annuity Fund decreases from Ksh 3 per litre of fuel to Ksh 1.50 per litre of fuel, and at the same time increases the allocation to the fuel levy collection account from Ksh 22 per litre of fuel to Ksh 23.50 per litre of fuel.
“By reducing the portion of the levy that finances annuity road projects, the government eases the pressure on pump prices for motorists, providing a slight relief to them, while still collecting the levy,” the document states.
Instead of multiple taxes on mobile phones, it proposes a 25% excise duty, which will be collected at the point of activation.
Mobile phones are currently subject to 16% VAT, 10% excise duty, 25% import duty, 2.5%Import Declaration Fee, and 2% Railway Development Levy, an aggregate tax burden of about 55.5%.
Also Read: Kenya Budget 2026/27: Expenditure, Revenue, Deficit, Borrowing, and Debt Explained
Taxation on Mobile Phones, Bottled Water, Sugar Confectionery, and Tobacco Products
Now the mobile phones are no longer subject to VAT, ID fee, RDL and import duty. It says that this is “to bring more certainty and fairness in the market” and “to lower the overall tax burden applicable to mobile phones”.
Excise duty will be removed on bottled water, stating that it is no longer primarily viewed as a luxury product.
It also intends to levy sugar confectionery manufactured domestically at the same rate as the imported ones to “ensure fairness and eliminate discriminatory practice” on imports.
Selected excises on tobacco products will increase to reflect inflation.
The rate will increase from Ksh 11,382.48 to Ksh 12,550 per kilogram for manufactured tobacco, while cigars, cheroots and cigarillos will be charged Ksh 18,000 per kilogram instead of the current Ksh 16,260.29 per kilogram.
Also Read: Inside the 2026/27 Budget: How Trillions Are Split Across Key Sectors
Covers Changes in Excise Duty on Extra Neutral Alcohol, VAT Adjustments for Zero-Rated to Exempt Products in Finance Bill
On alcohol, there will be a reduction in excise duty on Extra Neutral Alcohol for use by licensed manufacturers from Ksh 500 per litre to Ksh 80 per litre on the argument that it “lowers the cost of production for licensed manufacturers and supports formal production”.
On VAT, some products will be changed from being zero-rated to exempt in order to have inputs match with final goods and reduce the pressure on the refunds for zero-rated inputs.
Also, the inputs/outputs used for the Public-Private Partnership projects will be exempt from VAT.
With regards to mitumba products, the VAT will be charged at import and domestic sale, making mitumba trade to comply at the import level only, eliminating the compliance burden on traders, while no tax burden will fall on the local sales.
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Finance Bill 2026: Kenya Cuts Phone VAT, Hikes Tobacco Duty. Credits Files