Kenya’s government has updated its tax regulations to include digital payment services under the value-added tax (VAT) framework. The change, part of the Finance Act 2026, now requires businesses using electronic payment methods to pay 16% VAT on processing, card settlement, and payment gateway fees.
The new rule applies to all merchants who accept digital payments, including those using mobile money platforms and credit card processors. This means businesses will now face additional costs when using these services, as the fees are now subject to the standard VAT rate.
This change comes as Kenya continues to modernize its financial sector and regulate the growing digital economy. The government has been working to align tax policies with the increasing use of digital transactions, which have become a key part of daily commerce.
The move is expected to increase the financial burden on small and medium-sized businesses, which often rely on digital payment solutions. Industry experts have noted that the new tax could impact cash flow for many businesses, particularly in retail and hospitality sectors.
The regulation is part of broader efforts to ensure that all economic activities, including digital transactions, contribute to national revenue. The government has also been promoting financial inclusion through digital tools, while now imposing new tax obligations on those who use them.
