Card Payments Could Become More Expensive Under Finance Bill 2026

Proposed tax measures contained in Kenya’s Finance Bill 2026 may increase the cost of handling digital transactions as authorities widen the scope of taxes tied to payment systems, software infrastructure and corporate distributions.

An analysis by PricewaterhouseCoopers identifies card processing charges among the areas likely to feel the effect if the draft law passes without changes. The firm says new withholding tax treatment on merchant and interchange fees could introduce additional costs across the payments chain, particularly for businesses processing large transaction volumes.

The proposed amendments arrive at a time when electronic payments continue to expand across retail trade, banking, transport and online commerce.

PwC’s review places particular focus on the Bill’s attempt to broaden categories of income subject to withholding tax.

Under the draft wording, systems used for payment switching, transaction clearing, settlement infrastructure and software distribution could fall within an expanded definition of royalties. Payment processing platforms and network-related services are also included.

That change may affect how cross-border technology services are taxed, especially where Kenyan firms depend on regional or foreign-owned digital infrastructure.

The consultancy argues that wider tax exposure on transaction infrastructure may ultimately filter through operating costs in sectors already dependent on fast-moving electronic payments.

The Bill introduces a wider package of tax administration changes aimed at increasing collections.

Among them are shorter compliance timelines for annual returns and nil filings. Taxpayers would be expected to submit annual returns by the fourth month after the end of a financial year, while nil returns would move to a one-month filing window.

Separate proposals target other revenue streams.

Betting and gaming winnings would attract a 20 percent withholding tax under the draft law. Scrap metal sales would face a 1.5 percent withholding tax.

The Bill also removes the preferential 5 percent dividend withholding tax currently available to citizens of East African Community member states.

Another provision flagged by PwC concerns retained earnings.

The Kenya Revenue Authority would gain room to classify at least 60 percent of undistributed distributable income as deemed dividends in certain circumstances. Companies that retain profits for reinvestment or expansion could therefore face additional tax exposure.

PwC also notes the absence of changes to PAYE bands despite expectations earlier in the year that personal income tax adjustments could form part of the package.

The consultancy says the latest draft continues a broader pattern of strengthening enforcement authority within the tax system while narrowing room for taxpayer flexibility.

One proposal viewed more positively by the firm relates to the property market.

Transfers into Real Estate Investment Trusts would be exempt from capital gains tax under the Bill, a move PwC says may improve liquidity and encourage wider use of REIT structures.

The government is separately seeking to extend its tax amnesty programme covering penalties and interest tied to liabilities accumulated up to 2025.

To qualify, taxpayers would need to clear outstanding principal taxes by December 31, 2026.

The Finance Bill is scheduled for parliamentary debate before the proposed July 1, 2026 commencement date.

Banks, fintech operators, payment processors and large retailers are expected to closely monitor the discussions given the growing role of electronic transactions within Kenya’s commercial economy.

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