The government of Kenya has introduced a new levy on mitumba imports under the Finance Bill 2026 as part of tax reforms aimed at widening the revenue base and formalizing informal trade.
New proposal targets second-hand clothing, footwear, and other worn goods, subjecting them to a structured tax framework upon importation.
The government aims to create a more balanced trading environment between imported second-hand goods and locally produced products.
Under the Income Tax Act, the proposal introduces a new framework that will see tax collected upfront at the point of importation.
“Notwithstanding any other provision of this Act, a tax shall be payable by a person in respect of income derived from the importation into Kenya of worn clothing, worn footwear and other worn articles classified under tariff heading 6309,” read part of the bill.
New Tax Structure for Mitumba Imports
The Finance Bill 2026 introduces Section 12H into the Income Tax Act, establishing a tax on income derived from the importation of worn clothing, footwear, and other used articles classified under tariff heading 6309.
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This category includes worn clothing (6309.00.10), worn footwear (6309.00.20), and other worn items (6309.00.90), effectively in the mitumba import chain.
Under the new framework, taxable profit will be capped at 5% of the customs value of imported goods.
The applicable income tax rate is then applied to this deemed profit, with the tax collected at the point of importation before goods are released into the market.
Tax is structured as a final charge, meaning importers will not be required to make any further income tax declarations or adjustments for the same consignments once payment is made.
“The tax payable under this section shall be due and payable upon importation and prior to the release of the goods and shall be a final tax in respect of the income,” read the Finance Bill in part.
The strategy had also proposed introducing a minimal withholding tax on imports, to be treated as an advance tax. However, the Finance Bill adopts a different approach by introducing a final presumptive tax, eliminating the need for reconciliation or further filings.
This shift is designed to address concerns about tax evasion and the filing of nil returns by traders handling significant volumes of goods.
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Expected Impact on Local Businesses and Market Dynamics
The measure aligns with the government’s Medium-Term Revenue Strategy (2023/24–2026/27), which emphasizes expanding the tax base by improving visibility in sectors dominated by micro and small enterprises.
By introducing a tax at the point of importation, the government also aims to reduce the price advantage that mitumba often has in the local market.
This could improve competitiveness for domestic manufacturers, particularly in the textile and footwear sectors, which have struggled to compete with low-cost imports.
Other Taxes Introduced in Finance Bill
Under the Finance Bill 2026, the government has also introduced several other tax measures across different sectors.
Excise duty on vintage vehicles, targeting motor vehicles whose year of first registration is at least 30 years before the date of purchase and valued at KSh10 million or more. The proposed tax rate is 50% of the excisable value.
The Bill also revises excise duties on beverages, with fruit and vegetable juices without added sugar or alcohol taxed at KSh14.14 per litre, while those containing sugar or sweeteners will attract a higher duty of KSh20 per litre.
In the digital sector, the government proposes a 25% excise duty on telephones for cellular and wireless networks, with the tax liability arising at the point of activation of the device.
The Bill also introduces a Non-Resident Rental Income Tax, which imposes a 10 percent final tax on income earned by non-residents from property in Kenya.
On employment benefits, the Bill provides a tax exemption for gratuity payments, provided the employment contract runs for at least three continuous years and contributions do not exceed 31%of basic salary.
Corporate tax reforms are also included, with the Bill reducing the corporate tax rate for non-resident companies from 37.5 % to 30 percent.
Additionally, repatriated income by contractors will be subject to a 15 percent tax rate, aimed at improving Kenya’s investment competitiveness.
Finally, virtual asset service providers, including crypto exchanges and trading platforms, will be required to file annual user transaction reports.
