The Finance Bill 2026 has proposed raising taxes on tourism, aviation, and affordable housing while exempting VAT on phones, electric transport, and key medical supplies, in a broad overhaul that shifts the tax burden away from consumers and onto investment-heavy sectors.
- •The bill also increases the duty-free allowance for returning passengers, the value of goods travelers can bring into a country without paying import taxes, to US$2,000 from US$300.
- •At the core of the tax bill is the government removing VAT exemptions that have long reduced costs for developers and large projects, while expanding relief on some everyday goods and sectors tied to cost of living and energy transition.
- •Construction-related tax breaks are among the biggest casualties, as well as goods and services used to build tourism facilities including hotels, conference centers and large recreational parks, which would now attract the standard 16% VAT after losing their exempt status.
The aviation sector faces a similar rollback as VAT exemptions on aircraft and related equipment would be scrapped, along with specialized aviation instruments. Only aircraft spare parts remain exempt from VAT.
Other increases in VAT include denatured ethanol (alcohol that has been deliberately made undrinkable by adding chemicals so it can be used for industrial and energy purposes) which moves from being VAT exempt to 16%, adding to costs in industrial and energy-related applications.
Against those tax hikes is a wide set of new exemptions aimed at lowering prices for consumers and supporting specific policy goals. Medical supplies are a major beneficiary with dialyzers being added to the exemption list, while pharmaceutical inputs shift from zero-rated to fully exempt status thus reducing compliance costs for manufacturers and suppliers.
In agriculture and manufacturing, inputs for animal feed production and sugarcane transport services would also become exempt.
Consumer-facing goods see some of the most visible relief. Mobile phones for cellular and wireless networks would no longer attract VAT, a move likely to lower retail prices. Electric motorcycles, electric bicycles and electric buses, along with solar and lithium-ion batteries and bioethanol cooking stoves, would also be fully exempt from paying VAT, reinforcing government policy support for EVs and clean energy.
Additional exemptions cover scrap metal, locally supplied second-hand clothing, and goods used in public-private partnership infrastructure projects. Goods for official aid-funded projects remain VAT exempt, with a provision allowing existing exemptions granted before 30 June 2026 to continue until project completion.
