Your Kenyan customers pay you through credit cards and MPesa. Now, Kenya’s National Treasury has officially closed the statutory loopholes that previously shielded card networks and processing fees from paying a local withholding tax. 

The Finance Act 2026 was officially signed into law on June 26, 2026, with most provisions taking effect on July 1, 2026. While the loud public and industry pushback successfully killed the highly controversial proposals for a 16% VAT on mobile money service providers (like M-Pesa) and the 25% phone excise duty, the sweeping changes to card payments crossed the finish line intact.

If you sell digital products, subscriptions, or services in Kenya, the final Act brings immediate compliance and pricing shifts to your radar. Here is what survived the bill, who it hits, and what you need to do about it.

Table of content

• What made it into the final Kenya Finance Act 2026

• Why does this Act matter to global merchants?

• What should you do now?

• How Startbutton Africa helps you navigate the new tax laws

What made it into the final Kenya Finance Act 2026

Instead of targeting consumers' mobile wallets through VAT, the final Act goes after the backend of card transactions by broadening the scope of Income Tax definitions. Two major changes now target payment processing:

1. Interchange and Merchant Fees are now "Professional Fees": 

The Act explicitly expands the definition of "management or professional fees" to include interchange fees and merchant service fees arising from card-based transactions. This moves these transaction fees squarely into the withholding tax (WHT) net, taxed at 20% for non-residents and 5% for residents.

2. Card Network Charges are now "Royalties": 

Any fees paid for the use of or access to proprietary digital payment card networks or platforms (such as service, network, or processing fees) are now legally classified as royalties. If these fees are remitted to a non-resident platform, they trigger a heavy 20% withholding tax.

These amendments are the government's direct statutory countermove to recent Supreme Court rulings (like the Absa/Barclays case), in which the Kenya Revenue Authority (KRA) lost its bid to levy withholding tax on card interchange fees under the old definitions. That loop is now legally closed.

Why does this Act matter to global merchants?

You might look at "withholding tax on card networks and processors" and think this is only a problem for Visa, Mastercard, or local acquiring banks. It isn't. In cross-border B2B payments, taxes rarely stay with the infrastructure. For an international business selling into Kenya, this usually plays out across three critical points:

1. Gross-up clauses are introduced: Most international payment gateways and platforms protect their margins by including "gross-up" clauses in their contracts. When a PSP’s costs go up 20% due to a withholding tax levy, three things typically happen in this order: the PSP passes the cost into its transaction fees, merchants absorb the higher fees or reprice, and customers feel it at checkout.

2. Remittance headaches for your finance team: Card payments are natively processed and settled on a net basis (fees are deducted automatically before the payout hits your bank account). Someone in the chain has to calculate it, deduct it and remit a 20% or 5% withholding tax to the KRA across high transaction volumes. If you’re selling directly into Kenya, that someone is you.

3. Your conversion rate is at risk: Kenyan consumers are extremely price-sensitive to transaction costs. When mobile money fees rose in past tax cycles, usage patterns shifted within weeks. If completing a payment gets more expensive, some customers simply won’t complete it.

What should you do now?

The era of speculation is over; the Act is active law. To avoid compliance friction or sudden margin erosion, here’s what you should do:

1. Audit your payment infrastructure: Review your merchant contracts for Kenya. Identify exactly which entities handle your card processing and check for gross-up tax provisions.

2. Model the fee adjustment: Calculate your current acceptance cost for Kenyan card transactions. Factor in a worst-case 20% tax overlay on the processor's service/interchange fee layer to determine if your product pricing needs to be adjusted.

3. Shift to localized tax management: Ensure your accounting workflows are configured to track, separate, and remit withholding tax on card fees if you act as your own Merchant of Record (MoR) in East Africa.

| Read also: How to register a business in Kenya — and why using an MoR might be a smarter first move

How Startbutton handles regulatory change, across major African market

Kenya just expanded its digital withholding obligations and redefined card network royalty fee requirements. Every business transacting in the market now has a compliance decision to make: build the infrastructure internally, or find a structure that absorbs it.

This is not a Kenya problem. It is a recurring one. Markets across Africa update their digital commerce tax frameworks on their own timelines, with their own definitions, and their own reporting requirements.

Businesses operating through Startbutton in Nigeria and Ghana have already seen what this looks like from the right side of it. When those markets shifted their frameworks, reconfiguring for compliance was Startbutton's engineering problem — not theirs. Their checkout didn't change. Their finance teams didn't build bespoke tax workflows. The regulatory adjustment showed up as a line item, not a quarter's worth of work.

That is what a Merchant of Record structure does. When Startbutton is the legal merchant of record for your transactions, withholding obligations, royalty fee management, and tax authority remittance sit on our side of the ledger.

Kenya's frameworks will keep evolving. So will Nigeria's, Ghana's, and every other market you're in or entering. The question is whether every change has to become your project.

Startbutton is a leading Merchant of Record for African markets. Join over 200 global businesses using Startbutton to power their expansion. Get started here.