July 2026: VAT on digital payment and money transfer services
Kenya is set to widen the scope of VAT to cover a broad range of digital financial and payment processing services from 1 July 2026 under the Finance Bill 2026.
The proposals target fintech and platform-based payment activities, including money transfers, payment processing, settlement services, merchant acquiring, gateway services and payment aggregation supplied through software or digital platforms for a fee or commission.
Under the draft amendments, commissions earned by payment service providers (PSPs) on these services would become standard-rated for VAT purposes.
Fintech VAT disputes prompt legislative response
The proposed changes appear designed to address growing uncertainty over the VAT treatment of digital financial services in Kenya. Recent court decisions had supported arguments that certain fintech payment services qualified as VAT-exempt financial services.
In particular, the Kenyan High Court recently ruled in favour of a payment service provider, concluding that commissions earned on some payment processing activities were exempt from VAT. The Finance Bill now seeks to override this position by explicitly bringing these services within the VAT net.
Wider compliance burden for payment providers
The move will create clearer VAT obligations for PSPs and may reduce future disputes with the Kenya Revenue Authority (KRA). However, it is also expected to increase compliance and invoicing obligations across the fintech sector.
Digital payment providers, gateway operators and ecommerce payment platforms may now need to:
- reassess VAT treatment of commissions and transaction fees;
- update billing and invoicing systems;
- review contracts and pricing structures; and
- determine whether additional VAT costs will be passed on to merchants or consumers.
Growing global trend for taxing digital financial services
Kenya joins a growing number of jurisdictions seeking to modernise VAT systems for the digital economy. Tax authorities globally are increasingly targeting fintech, platform intermediaries and payment ecosystems as electronic payments rapidly replace traditional banking channels.
The proposed VAT changes are scheduled to take effect from 1 July 2026, subject to enactment of the Finance Bill.
