Kenya plans to widen taxes on digital payments and software services, pulling firms like Visa, Mastercard, and Microsoft deeper into its revenue net as the government seeks new revenue source.
The proposal, contained in the proposed Finance Bill 2026, expands the definition of “royalty” under the Income Tax Act to cover payment card schemes, digital platforms, and software-related services that underpin Kenya’s banking and startup economy.
The move could raise the cost of cross-border technology services in one of Africa’s largest digital economies, with implications for banks, fintechs, and startups that rely heavily on foreign cloud infrastructure, payment rails, and enterprise software.
At stake is how far Kenya can push digital taxation without slowing the growth of a tech sector the country has spent years promoting as a regional engine for innovation and investment.
Under the bill, royalties would include payments linked to “a proprietary digital platform, payment platform, payment network, payment card scheme, payment processing system, switching system, clearing system, or settlement system.”
The proposed amendments also broaden royalty payments to cover software-related charges “whether in the form of licence, development, training, maintenance or support fees.”
Under the current Income Tax Act, royalty payments are mainly tied to the use of copyrights, patents, trademarks, software, and industrial or scientific equipment. The proposed amendments expand the definition to encompass the infrastructure powering digital commerce and potentially expose additional payments to withholding taxes and increase compliance obligations for Kenyan companies paying overseas technology vendors.
Banks operating card businesses through Visa and Mastercard networks could face additional tax scrutiny over processing and settlement fees. Startups and enterprises using software from Microsoft, Oracle, or Amazon Web Services (AWS) may also see higher costs if providers pass on the extra tax burden.
The proposal is part of Kenya’s broader push to raise more revenue from the digital economy after introducing taxes on digital services, online creators, and virtual asset providers in recent years.
It may also trigger disputes with multinational companies over whether certain platform and processing fees qualify as royalties under Kenya’s double taxation agreements with other countries.
Kenya’s parliament has opened public participation on the bill, setting the stage for debate over tax proposals that could affect consumers, businesses, investors, and Kenya’s digital economy amid growing public backlash.