Kenya’s new tax proposals threaten M-KOPA, Sun King phone assembly plants

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Kenya’s Finance Bill 2026 has proposed a series of tax changes that could raise the cost of locally assembled smartphones while making imported handsets cheaper, threatening the viability of local plants built by M-KOPA and Sun King.

The Bill removes the zero-rated VAT status enjoyed by locally assembled phones, imposes a 25% excise duty on domestically manufactured devices, and exempts imported finished phones from the Import Declaration Fee and the Railway Development Levy. A Kenya Association of Manufacturers (KAM) position paper, seen by TechCabal, said the measures will erase the competitive advantage that attracted investment into local assembly.

The proposals have raised concerns that Kenya could undermine an industry it deliberately nurtured through the Finance Act 2022, which introduced zero-rated VAT on locally assembled phones to attract manufacturers and lower smartphone prices.

“The foundational tax structure underpinning the creation, growth, and sustainability of the industry will be eroded,” the position paper said, warning that the proposals could lead to factory closures, job losses, and undermine Kenya’s digital economy ambitions.