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Clarity around the taxation of carbon credits in Kenya

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Clarity around the taxation of carbon credits in Kenya

Alex Kanyi, Partner in Tax & Exchange Control practice, and Clarice Wambua, Consultant in Environmental Law practice, were recently featured in The Star, where they unpacked the lack of clarity around the taxation of carbon credits in Kenya.

16 Feb 2026 1 min read Article

They note that the Kenya Revenue Authority’s (KRA) failure to categorise carbon credits as either goods or services has created uncertainty regarding the application of Value Added Tax (VAT).

Alex explains that carbon credits remain undefined under Kenya’s VAT regime, a gap that poses potential risks for project developers, investors, and traders. He adds that while Kenya has made significant progress in regulating carbon markets, the continued uncertainty around VAT treatment could impact pricing, cash flow, and compliance across the sector.

Clarice highlights that Kenya is one of Africa’s leading carbon credit producers, having issued more than 52 million credits by 2024. These projects span forest conservation, sustainable agriculture, clean cookstoves, and renewable energy initiatives.

However, Alex and Clarice caution that without a clear statutory definition, disputes with the Kenya Revenue Authority remain a real possibility.

Click here to read more. 

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