PwC warns Finance Bill 2026 could make digital payments costlier
NAIROBI, Kenya, May 14 – Tax advisory firm PricewaterhouseCoopers (PwC) has warned that proposed tax measures in the Finance Bill 2026 could increase the cost of digital payments and tighten the tax burden on cross-border technology services as the government moves to widen its revenue base.
In its analysis of the Bill tabled before the National Assembly, the consultancy flagged a proposal to subject merchant service and interchange fees from card payments to withholding tax, saying the move risks raising the cost of cashless transactions for businesses and consumers.
PwC also raised concern over proposals to expand the definition of royalties to cover software distribution, payment processing systems, payment networks, switching, clearing and settlement systems, potentially exposing more digital service payments to withholding tax.
“Notably, the Bill is silent on any review of the PAYE tax bands, representing a missed opportunity for the Government to implement reforms that had been suggested earlier in the year,” PwC said.
“The trend of increasing the Commissioner’s powers and constraining taxpayer rights continues with the proposed KRA assessment and enforcement powers.”
The Finance Bill 2026 seeks to amend the Income Tax Act, VAT Act, Excise Duty Act, Tax Procedures Act and the Miscellaneous Fees and Levies Act as part of broader efforts to strengthen tax administration and boost collections.
Among the proposals are shorter compliance timelines that would require annual tax returns to be filed by the fourth month after the financial year ends, while nil returns would be due within one month after year-end.
The Bill also proposes a 20 percent withholding tax on betting and gaming winnings, a 1.5 percent withholding tax on scrap metal sales and the removal of the preferential 5 percent dividend withholding tax rate currently enjoyed by East African Community citizens.
PwC further noted that the proposed deemed dividend threshold would allow the Kenya Revenue Authority to treat at least 60 percent of undistributed distributable income as dividends in certain cases, potentially increasing tax exposure for firms retaining earnings.
However, the consultancy said the proposed capital gains tax exemption on transfers of property into Real Estate Investment Trusts (REITs) could support uptake of REIT structures and improve liquidity in Kenya’s real estate market.
The Bill also proposes extending the tax amnesty programme for penalties and interest on liabilities relating to periods up to 2025, provided taxpayers settle outstanding principal taxes by December 31, 2026.
The proposed tax changes are scheduled to take effect from July 1, 2026 unless Parliament amends the provisions during debate.