Kenya VAT now applies to the fees behind card and digital merchant payments, at 16%. Ordinary transfers between people are not automatically affected. Shops may pass the extra cost on to you.
Next time you tap your card at a supermarket in Nairobi, or pay a shop by phone, there’s a new tax hiding in the process.
Kenya’s Finance Act 2026 brought fees for payment processing, settlement, merchant acquiring, gateway and aggregation services into the VAT net at the standard 16% rate, from 1 July 2026, according to a tax alert from law firm ENS. At least one bank has told customers the charge applies from 1 November 2026, TechTrends Kenya reported.
What exactly is being taxed?
Not your money. The tax applies to the fee a payment company charges to move the money.
When you pay a shop electronically, a company in the middle processes that payment. It charges the shop a small fee for this. That fee now carries 16% VAT. It covers:
- Electronic payment processing
- Card payment settlement
- Payment gateways, the systems that let websites take payments
- Merchant network connections
The tax does not apply to the full value of what you buy. If you spend KSh 1,000, the VAT falls on the processing fee, not on the KSh 1,000 (Startup Researcher).
What about sending money to family?
Standard M-Pesa and Airtel Money transfers between people are treated separately. They are not automatically caught by this tax (TechTrends Kenya).
Sending money already carries its own cost, though. Fees for mobile money transfers in Kenya attract 15% excise duty, a rate set by the Finance Act 2023 (PwC Kenya).
Why the new Kenya VAT matters
Kenya is one of Africa’s strongest digital payment economies. More than half of Kenyans, 52.6%, now use mobile money every day, up from 23.6% in 2021, according to the 2024 FinAccess survey led by the Central Bank of Kenya (FSD Kenya).
Banks warned that taxing payments could push people back to cash. “You tax digital payment platforms, you drive consumers to the mattress and to the informal economy,” said Raimond Molenje, chief executive of the Kenya Bankers Association (Mobile Money Africa).
The tax lands first on businesses. Shops pay processing fees, and many will pass the cost on through higher prices or card charges. Small traders who just moved from cash to digital payments may feel it most.
The backstory
The Kenya Revenue Authority had tried to collect VAT from payment firms before. It lost. In August 2025, the High Court ruled for payment firm Pesapal over a KSh 110.8 million tax demand (TechTrends Kenya). On 24 October 2025, the Tax Appeals Tribunal ruled against the taxman in a case involving Kenswitch, calling the assessment “erroneous and unlawful” (Techweez).
The Finance Act 2026 closed that gap by changing the law itself.
What to do next
- If you run a business: check your next statement from your bank or payment provider. Look for a new VAT line on your fees, and factor it into your prices.
- If you shop: watch for new “card charges” at the till. Ask how much they are before you pay.
- If you send money to family: your normal transfers should not change because of this tax. If your fees rise, ask your provider why.
