By Karen Kariuki, Associate - Tax

Legislative and Regulatory background

On 14th April 2026, the Government introduced a temporary reduction in Value Added Tax (VAT) applicable to petroleum products as part of broader measures aimed at mitigating rising fuel costs.

The intervention was implemented through Legal Notice No. 69 of 2026 and Legal Notice No. 70 of 2026, issued by the Cabinet Secretary for the National Treasury pursuant to Section 6(1) of the Value Added Tax Act, 2013, which empowers the Cabinet Secretary to vary the VAT rate through an order published in the Gazette.

Under Legal Notice No. 69 of 2026, VAT on petroleum products was initially reduced from the standard rate of 16% to 13%, representing the first step in the Government’s effort to cushion consumers from rising pump prices. Shortly thereafter, Legal Notice No. 70 of 2026 introduced a further reduction, lowering the applicable VAT rate from 13% to 8%.

The revised 8% VAT rate applies to key petroleum products including petrol, diesel and kerosene, which are ordinarily subject to the standard VAT rate prescribed under Section 5(2) (b) of the Value Added Tax Act, 2013.

The mid period change in VAT rates may give rise to transitional compliance considerations in the preparation and filing of VAT returns for April 2026, particularly in relation to apportionment of output and input VAT tax across transactions occurring before and after the rate changes.

Duration and extension

The reduced rate is time bound in nature. It applies for an initial period of 90 days, running until 14 July 2026. 

To provide flexibility in responding to evolving market conditions, the Act confers upon the Cabinet Secretary for the National Treasury the discretionary power to extend the 8% rate for a further 90-day period. 

This extension may be granted where fuel prices remain unfavorable at the expiry of the initial window.

Policy rationale

The intervention was introduced against a backdrop of elevated global oil prices and regional supply disruptions, which have exerted upward pressure on pump prices and, consequently, on input costs across key sectors including transport, manufacturing, and agriculture. 

The VAT reduction is intended to provide short term relief from cost push inflationary pressures affecting both households and businesses, while the Government absorbs a temporary contraction in VAT revenues.

Character of the measure

In substance, the VAT reduction on petroleum products is a temporary, targeted fiscal intervention implemented through subsidiary legislation under the Value Added Tax, 2013 serving as a short term economic shock absorber. 

It is distinguished by a clear sunset clause and a built-in extension mechanism, affording the National Treasury the agility to calibrate the relief period in line with prevailing fuel market conditions.