Sugarcane farmers and transporters are set to benefit from a major tax reform under the proposed Finance Bill 2026, which will fully exempt sugarcane transport services from Value Added Tax (VAT).
The move aims to reduce operational costs in the sugar industry, a sector that has long faced financial pressures from high transport and production expenses.
By lowering transport costs, the government hopes more money will remain within the sugarcane value chain, potentially increasing earnings for farmers at the farm gate.
Under the proposed changes, selected supplies will shift from zero-rated VAT status where VAT is charged at 0% but input VAT can be reclaimed to VAT-exempt status, meaning no VAT will be charged and businesses cannot reclaim input VAT.
For sugarcane transporters, this is expected to simplify compliance by reducing paperwork, eliminating the need to file VAT returns, and easing input tax tracking.
“The exemption is intended to simplify tax administration and reduce compliance costs for transporters, who play a critical role in moving sugarcane from farms to factories,” the government noted.
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The reform comes as part of broader efforts to revive Kenya’s struggling sugar industry, which has faced years of inefficiencies and high production costs.
By making transport more affordable, stakeholders say the measure could indirectly improve cane pricing for farmers and reduce deductions along the supply chain.
The sector analysts say the Finance Bill’s VAT adjustments could strengthen the entire sugarcane value chain from farming and transport to processing and value addition enhancing the sector’s competitiveness and long-term sustainability.
The VAT exemption is being hailed as a win for farmers and transporters, easing tax burdens and supporting the government’s vision of a more resilient and profitable sugar industry.
By Obegi Malack
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