Finance Act 2026 takes effect as imported sugar tax jumps fivefold

The Finance Act 2026 is now law, bringing into effect a raft of tax measures that will affect consumers and businesses.

Among the most immediate changes is the sharp increase in excise duty on imported sugar. Importers will now pay Ksh.40 per kilogramme, up from Ksh.7.50 previously, increasing the tax burden by more than 400 per cent.

The government says the move is intended to protect local sugar farmers and millers from cheaper imports, although it is also expected to increase the cost of imported sugar.

"As we all know, Kenya is a net importer of sugar. In fact, recent reports indicate that the production capacity of our local millers is down by 27 per cent, which means much of the sugar retailed on our shelves is imported. I would expect the immediate impact to be an increase in sugar prices and, of course, more pain for consumers in terms of the cost of living,” said Tarra Agility Africa Tax Consultant Brian Odiwuor.

The law also introduces one of the biggest administrative changes to Kenya's tax system in recent years through pre-populated tax returns.

Instead of completing returns from scratch, taxpayers will receive returns already prepared by the Kenya Revenue Authority (KRA) using information available in its systems.

They will then have an opportunity to review the information, make any necessary corrections and submit their returns.

"The onus is upon the taxpayer to verify what has been pre-populated,” stated Capital A Investment Head of Research Bank Churchill Ogutu.

Brian Odiwuor added: “It's going to be a real challenge, especially if the capacity on the revenue authority's side is not addressed. We even saw yesterday that KRA reported downtime in its systems because so many taxpayers were trying to file their returns on the deadline day. Those issues need to be addressed if we are to go that route."

For businesses and individuals with outstanding tax liabilities, the Act extends the tax amnesty programme until December 2026, giving eligible taxpayers additional time to settle unpaid taxes while benefiting from relief on penalties and accrued interest.

The government has also widened excise duty to cover several imported products, including medium-density fibreboard (MDF), plywood and shower heads, in a bid to encourage local manufacturing.

"We have not yet seen incentives aimed at increasing purchasing power or spending power. One of the proposals from lobby groups was a reduction in the Pay As You Earn (PAYE) rate across all tax bands to unlock consumers' purchasing power,” Odiwuor noted.

"I think it could probably be introduced closer to the election,” added Ogutu.

The Finance Act is expected to raise more than Ksh.100 billion in additional revenue to support the 2026/27 budget while reducing the government's dependence on domestic borrowing.