Nairobi — The government has proposed an 8 percent reduction on input value-added tax (VAT) for agricultural exporters, cutting the rate from the current 16 percent, in a move aimed at easing costs in the export sector.

The proposal is contained in the Finance Bill 2026, which is expected to be tabled in Parliament in March.

If approved, the bill will also remove excise duty and export promotion levies on packaging materials, allow faster VAT refunds through offsetting, and extend preferential tax treatment similar to Export Processing Zones (EPZs) and Special Economic Zones (SEZs) to long-standing exporters who sell all their output abroad. This would exempt VAT on local purchases.

The reforms further propose expanding air freight capacity through Kenya Airways and additional international carriers to support agricultural exports.

Agriculture Cabinet Secretary Mutahi Kagwe said the measures are intended to address cash flow challenges facing exporters, particularly delays in VAT refunds and high statutory charges.

He was speaking during the launch of Flamingo Group Investments' expansion project in Naivasha. Kagwe said the government has paid Sh470 million out of Flamingo's Sh1.8 billion VAT refund backlog, with additional payments planned.

The proposed tax changes are expected to benefit exporters across horticulture, tea, coffee and livestock value chains if enacted.