Finance Bill 2026: Treasury to Impose 16% VAT on M-Pesa, Airtel Money and Other Payment Platforms

Kenya’s National Treasury introduced the Finance Bill 2026, proposing a 16% Value-Added Tax (VAT) on over 40 mobile payment platforms, including M-Pesa, Airtel Money, Pesapal, and Kenswitch. If approved by Parliament, the tax would apply to fees charged by platform operators, potentially increasing transaction costs for users. The Treasury clarified that VAT would not apply to money transfers themselves but to ICT services enabling payments, such as paybills or tills. M-Pesa, launched by Safaricom in 2007, serves over 37.91 million customers in Kenya and processes billions of shillings daily, making it a key target for tax revenue. Safaricom’s Kenyan business recently surpassed KSh 100 billion in earnings, driven by financial services growth. However, services like Fuliza and M-Shwari—operated through partnerships between Safaricom and commercial banks—would remain VAT-exempt under the proposed law. The VAT proposal follows a High Court ruling that blocked the Kenya Revenue Authority (KRA) from taxing payment service providers like Pesapal and Kenswitch. Low-value transactions under KSh 100 are exempt, while current M-Pesa fees range from KSh 7 (for transfers between KSh 101 and KSh 500) to a cap of KSh 108 for transactions above KSh 50,000. The Finance Bill 2026 also seeks amendments to the Tax Procedures Act, granting the KRA commissioner broader powers to assess tax liabilities using secondary data. This includes relying on withholding tax deductions reflected in the iTax system as evidence for tax obligations. The proposed changes aim to strengthen revenue collection but have raised concerns about expanded government access to financial data.