Kenya’s President William Ruto signed the country’s Finance Bill 2026 into law on June 24, 2026. Inside this legislation are provisions that could greatly impact the operating conditions for industries, including the flower sector, exporters, and the logistics chain that moves Kenyan flowers.
For the floriculture sector (and its essential logistics), this legislation comes at a time when export margins are quite tight, and analysts and stakeholders have been analyzing its specific tax adjustments and fiscal policies.
Briefly on What the Finance Act 2026 Is About
This 2026 Finance Act is Kenya's annual tax amendment instrument, designed this year around the theme of the Budget Policy Statement: ‘Accelerating Gains under the Bottom-Up Economic Transformation Agenda for Inclusive and Sustainable Growth.’ Most provisions take effect from July 1, 2026. A smaller set of changes kicks in on January 1, 2027.
The legislation has been touted as a compliance-focused bill, and not quite a tax-raising one, marketed as one that ‘does not raise taxes on ordinary Kenyans; instead, it improves fairness by strengthening compliance, closing loopholes, and ensuring that every person and business pays what is lawfully due.’
The State of Kenya’s Floriculture Sector Beforehand
To understand what it means for the country’s floriculture industry, one has to first appreciate the sector and what it has been dealing with. Kenya's flower industry generates around $845 million in annual export earnings, employs more than 200,000 people directly, and contributes considerably to the country's GDP.
The country is Africa's leading cut flower exporter, with roses accounting for 69% of total exports. Its high-altitude farms around Naivasha, Nairobi, Meru, Laikipia (Nanyuki), Nakuru (and its environs), and the Rift Valley regions of Eldoret and Kitale, deliver flowers to global markets. But the sector has achieved all of this while wrestling with issues like delayed VAT refunds, sky-high freight costs, and a tax regime that has made basics like packaging more expensive by the year. The logistical edge has also been wearing away.
Air freight costs have surged from approximately $3.10 to $5.00 per kilogram over a short period in 2026, in part because the escalating Middle East conflict disrupted key Gulf air cargo corridors, which handle a significant share of Kenya-to-Europe freight. Freight costs now account for 30% to 40% of total production and shipping expenditure for many growers.
The Kenya Flower Council (KFC) has often flagged a backlog of roughly $77 million (KSh 10 billion) in delayed VAT refunds, tying up working capital that farms would otherwise use for irrigation, cold chain upgrades, and labor costs. Combined with the cumulative tax burden on packaging materials, including a 25% excise duty on kraft paper introduced under the Finance Act 2025, which the Kenya Association of Manufacturers noted had significantly pushed up the overall tax burden on that input, the sector entered 2026 under financial duress.
Industry projections earlier in 2026 suggested that without intervention, Kenya could lose up to 20% of its flower export volumes, costing more than $15 million per month.
Key Provisions Targeted Relief for Flower Exporters
The Finance Act 2026 addresses several of the sector's most pressing cost pressures in a fairly direct way. Input VAT for exporters drops from 16% to 8%. This is the most significant cost-side relief in the law. The halving of input VAT lowers the cost basis for flowers, fresh produce, tea, coffee, and other agricultural exports.
Excise duty and export promotion levies on packaging materials, including kraft paper, are removed. For floriculture, packaging is not a fringe cost because cartons, liners, and sleeves are required for every consignment. Removing this duty lowers per-stem export costs, and for a sector where margins have tightened to near-breaking point. This is important. The Kenya Association of Manufacturers had been pushing for this reform, noting that the cumulative levies on kraft paper were undercutting Kenya's packaging competitiveness.
Faster VAT refund mechanisms through offset against future tax liabilities. The law includes provisions to allow long-established 100% exporters to operate under the Export Processing Zone and Special Economic Zone frameworks, exempting their local purchases from VAT. Combined with accelerated offset mechanisms, this addresses the cash flow crunch that the refund backlog has created for the sector.
The certificate of origin requirement for imports is removed. The Finance Act 2026 repeals Section 44A of the Tax Procedures Act, which required all imported goods to carry a certificate of origin. This reduces compliance friction and administrative delays for importers of inputs such as fertilizers, chemicals, and growing media that support production.
Logistics and the Cold Chain
If floriculture is the heartbeat of this export industry, logistics is the circulatory system. The cost and reliability of freight have been the most pressing concerns for exporters in 2026. Global supply chain disruptions and the high price of fuel continue to exert pressure on transport costs. While the Finance Act 2026 provides the legal framework for the national budget, the logistics sector remains exposed to global fuel market volatility.
The Kenyan Government has indicated an interest in improving logistics infrastructure, particularly cold-chain facilities and airport cargo handling capabilities. Efficient cold-chain management is essential for preserving the quality of flowers from the farm gate to the overseas market. When logistics costs reach high percentages of total export expenses, even minor improvements in infrastructure or reduced transit times mean significant savings for exporters.
Freight forwarders are working to optimize routes and consolidate shipments to mitigate the impact of high air freight charges. The Kenyan Government’s proposal to streamline policies and improve the efficiency of regulatory hurdles at the airport is a positive sign. If these promises are fulfilled, the logistics sector could move away from crisis management and to a more planned and cost-effective approach to moving produce. The goal for 2026 and beyond is to lower the per-kilogram transport cost, which presently restricts the potential of smaller exporters who struggle to absorb these expenses.
The Longer-Term Picture for Growers and Exporters
The Finance Act 2026 comes at a difficult time for Kenya's flower sector. Freight costs are high, global geopolitical uncertainty has disrupted supply chains, and smaller growers continue to operate on thin margins. The relief measures in the law are well-targeted and, to some extent, respond to what KFC and industry groups have been asking for, particularly on input VAT and packaging levies.
That said, the law does not resolve all structural challenges. The excise duty strain with EAC trading partners is a friction point for packaging supply chains. The shortened income tax return deadlines add compliance pressure for farms that run on seasonal and variable revenue cycles. And while the government has committed to expanding Jomo Kenyatta International Airport (JKIA) cargo capacity, the infrastructure gains could take time to materialize.
Moreover, the sector's competitiveness also depends on factors outside the law, including global flower auction prices, exchange rates, and whether the Middle East situation stabilizes enough to restore normal cargo corridor volumes through Gulf carriers, which are all factors impacting the flower industry.
Featured image by @pjdaveflowersgroup. Header image by @theflowerhubkenya.
