Kenya proposes 16% VAT on M-Pesa

Kenya’s Finance Bill 2026 has revived a familiar question for mobile-money users: will sending money through M-Pesa get more expensive? The short answer is that the bill proposes to widen value-added tax to cover “digital and platform-based financial services,” according to analyses by KPMG, RSM Kenya and Oraro & Company Advocates. The bill itself was tabled before the National Assembly on April 30 and published on May 5, Oraro said, while Parliament’s website lists “The Finance Bill, 2026” among current House business. RSM said the proposals are not yet law and would only become effective if Parliament passes them, which it said is expected on or before June 30. ### Where does M-Pesa come into this if the bill does not name it in the headline? (assets.kpmg.com) M-Pesa is Kenya’s dominant mobile-money platform, so any VAT on digital payment or platform-based financial services is being read as directly relevant to its transaction charges. KPMG said the bill proposes to “bring to charge digital and platform based financial services,” and Capital FM reported that analysts were discussing the effect on services such as M-Pesa. (oraro.co.ke) Kenyan media and tax commentaries have framed the proposal as a 16% VAT tied to payment platforms and mobile-money charges. Nation reported in 2024 that a similar proposal would have raised the cost of mobile-money transfers, while current reporting and commentary on the 2026 bill say the same issue has returned. ### Is the 16% VAT on the transfer itself or on the platform’s fees? (assets.kpmg.com) Capital FM reported on May 21 that, under Treasury proposals, the VAT would apply to commissions and service fees earned by operators of digital payment platforms rather than directly to the value of consumer transfers. Kiema Onesmus, KPMG East Africa’s associate director for tax and regulatory services, told the outlet that operators were likely to pass the extra cost on to customers. (nation.africa) That distinction matters because mobile-money users usually pay a transaction charge, not a tax on the full amount they send. In practice, if VAT is added to the fee charged by a provider, the total cost paid by the customer can still rise even if the tax is legally imposed on the service provider’s charge. ### Why are people comparing this to earlier fights over mobile-money taxes? (capitalfm.co.ke) Safaricom opposed a similar proposal during debate on the 2024 Finance Bill, Business Daily reported, saying higher taxation on mobile-money transfers could hurt financial inclusion and push users toward informal channels. Nation also reported in 2024 that proposed VAT changes would increase the cost of mobile-money transfers, airtime and data. (capitalfm.co.ke) The 2026 bill also sits alongside other proposed tax changes affecting digital payments. Oraro said it would expand withholding-tax and royalty-related provisions tied to payment systems, while RSM highlighted proposed withholding tax on interchange fees, merchant service fees and payments to card companies. ### What are analysts saying about the likely effect on users? Kiema Onesmus told Capital FM that taxing transaction charges on digital payment platforms could push some users back toward cash. (businessdailyafrica.com) He said the proposal risked reversing gains in digital commerce and financial inclusion if higher charges discourage routine use of mobile money for transport, small retail purchases and person-to-person transfers. (oraro.co.ke) Those concerns have also been echoed elsewhere in the market. Sacco Review reported on May 22 that the Kenya Bankers Association warned proposed taxes on card transactions and digital payment services could raise the cost of financial services and weaken cashless adoption. ### What should users watch next? June 30 is the key date in the current process. (capitalfm.co.ke) RSM said the Finance Bill 2026 remains a proposal until Parliament passes it into law, and Parliament’s website shows the bill is before the National Assembly. If lawmakers amend the VAT language during debate or committee review, that will determine whether and how the proposal affects M-Pesa, Airtel Money and other payment platforms. (rsm.global) (saccoreview.co.ke)