From 1 November 2026, banks and fintech firms must apply a 16 percent Value Added Tax to fees charged for electronic payment processing, card‑transaction settlement, merchant‑network connectivity and payment‑gateway operations.

The Finance Act 2026 reclassifies these services as taxable, moving them out of the previous exemption for financial services and placing the fee‑level charge within the VAT net.

VAT is levied only on the service fee itself, not on the underlying value of the goods or services purchased, meaning merchants will see the tax added to the charge they pay their payment provider.

Ordinary person‑to‑person transfers, such as standard M‑Pay or Airtel Money transactions, remain outside the new VAT scope and continue to be treated separately.

The change follows high‑profile legal disputes in 2025 where the Kenya Revenue Authority’s demand for tax on payment‑service providers was challenged and partially overturned by the High Court and the Tax Appeals Tribunal.

Tax and advisory firms warn the added cost could be passed along the payment chain, raising fees for merchants and potentially influencing prices for consumers, especially for small businesses that operate on thin margins.

PwC notes that fintechs and intermediaries now fall within the tax net, while KPMG highlights that the clearer rules may come with higher costs for the affected services.