KRA does not tax the money you send on M-Pesa, Airtel Money or T-Kash. It taxes the fee charged by the provider. The principal amount (the money you are actually sending) is not subject to excise duty.
A common rumour claims that KRA takes a percentage of every transfer. That is not correct. The tax applies only to the transaction fee.
How the Tax Works
Excise duty is a consumption tax charged on the fee for money transfer services. Under the Excise Duty Act, money transfer services offered by banks, money transfer agencies and other financial service providers are excisable. The tax base is the transaction charge, not the amount being transferred.
The current rate is 15%. It was raised to this level by the Finance Act 2023, effective 29 July 2023. Safaricom, Airtel and Telkom all adjusted their tariffs around that time to include the higher duty. The same 15% rate applies across M-Pesa, Airtel Money and T-Kash because the law taxes the service, not the specific network.
Deposits into your wallet are free, so there is no fee and therefore no excise duty. When you receive money, you do not pay the duty yourself. It was already included in the fee paid by the sender.
Simple Examples
Sending KSh 1,000 on M-Pesa costs KSh 13. Of that fee, roughly KSh 1.70 is the 15% excise duty and the rest is the provider’s charge.
Withdrawing KSh 10,000 at an agent costs KSh 115. Of that, KSh 15 is the excise duty portion.
Fuliza’s daily maintenance fee is taxed differently. It falls under other fees charged by financial institutions and attracts 20% excise duty rather than 15%.
| Transaction | Total Fee | Excise Rate | Approximate Excise Portion |
|---|---|---|---|
| Send KSh 1,000 (M-Pesa) | KSh 13 | 15% | KSh 1.70 |
| Withdraw KSh 10,000 at an agent | KSh 115 | 15% | KSh 15 |
| Fuliza daily fee (certain balance) | KSh 30 | 20% | KSh 5 |
What KRA Does Not Tax
KRA does not treat ordinary person-to-person transfers as income. Sending or receiving money on your phone does not automatically make that money taxable as income for the individuals involved.
Business turnover through merchant accounts is different. A trader collecting significant amounts through a Till or Paybill may be liable for Turnover Tax and must issue eTIMS invoices. That is separate from the excise duty on the transaction fee. A personal Pochi receiving small amounts from friends is not treated the same way as a business till recording daily sales.
Recent Developments
There was a proposal in the Finance Bill 2026 to apply 16% VAT to ordinary person-to-person mobile transfers on top of the existing excise duty. Parliament dropped that proposal before the Finance Act was passed. Core P2P transfers remain subject only to the 15% excise duty on the fee.
Payments to certain government paybills (such as 222222) are zero-rated by Safaricom, meaning the provider does not charge its own fee.
Summary of the Rule
KRA taxes the fee, not the principal. The current rate on money transfer fees is 15%. The same principle applies to M-Pesa, Airtel Money and T-Kash. Always check the fee shown on your confirmation screen, as that is the amount that includes the excise duty.
