Banks and fintechs face a new VAT bill as Kenya changes digital payment tax rules
- The Finance Act 2026 introduces a 16% VAT on fees for digital payment services in Kenya.
- The VAT will apply to payment processing, card settlement, and payment gateway operations starting November 1, 2026.
- Ordinary person-to-person money transfers are exempt from the new VAT treatment.
The introduction of VAT on digital payment services may hinder the growth of electronic transactions in Kenya, particularly for small businesses that operate on tight margins. While the intention behind the tax may be to clarify the framework, it risks increasing costs for consumers and businesses alike, potentially stalling the push for financial inclusion.
