Updated 31 October 2026
Kenya does not tax the money you send on M-Pesa; it taxes the fee. Fees charged for money transfers by mobile money and payment service providers carry 15% excise duty, set by the Finance Act, 2023, according to PwC’s Kenya tax summary. Core money transfer services remain exempt from VAT, but from November 1, 2026, the Finance Act, 2026 brings digital payment processing, settlement, merchant acquiring, gateway and aggregation fees into 16% VAT. Income you receive through M-Pesa is taxed like any other income.
Tax on M-Pesa transactions at a glance
| What | Tax | Rate | Who bears it |
|---|---|---|---|
| Amount you send or receive | None as a transaction | 0% | – |
| Transfer and withdrawal fees by mobile money providers | Excise duty | 15% of the fee | Customer, built into the fee |
| Core money transfer services | VAT | Exempt | – |
| Digital payment processing, merchant acquiring, gateway, aggregation fees (from Nov 1, 2026) | VAT | 16% | Usually merchants and businesses |
| Business income received via till or paybill | Income tax / turnover tax | Per your tax regime | The business |
Excise duty: 15% of the fee, not the amount
The Finance Act, 2023 set excise on money transfers by cellular phone service providers and payment service providers at 15%, up from 12%. It also cut excise on fees charged by banks and money transfer agencies from 20% to 15%. If a transaction attracts a fee, the provider pays excise on that fee to KRA, and the published tariff already includes it. Free transactions, such as sending small amounts that carry no charge, attract no excise.
VAT on digital payment charges from November 1, 2026
The Finance Act, 2026 narrowed the VAT exemption for financial services. Ordinary money transfers stay exempt, but processing, settlement, merchant acquiring, gateway and aggregation services by payment service providers are now taxable, according to PwC and EY’s Finance Act 2026 review. Banks began applying the change; read our report on 16% VAT on digital payment fees. Merchants paying card or gateway fees should expect those charges to rise by up to 16% unless providers absorb it.
Is money received on M-Pesa taxable?
The transfer itself is not a tax event. But if the money is business income, salary, rent or payment for services, it is taxable under the normal rules, whether it arrives by M-Pesa, bank or cash. Gifts and support from family are not income. KRA has been looking at how to use till and paybill data to assess small traders; see KRA’s M-Pesa till data plan.
How to keep M-Pesa costs and tax low, legally
- Use free or cheaper bands: know the fee bands and limits in our M-Pesa limits guide.
- Businesses: keep till and paybill income separate from personal money, and record expenses so you are taxed on profit, not turnover.
- Merchants: ask your payment provider in writing whether VAT now applies to their fees and request tax invoices so you can claim input VAT if VAT registered.
FAQ
Is there tax on sending money via M-Pesa?
Not on the amount. A 15% excise duty applies to the transaction fee, and it is already included in the fee you see.
Does the 16% VAT apply to M-Pesa transfers?
No. Core money transfer services remain VAT exempt. VAT from November 1, 2026 applies to payment processing, merchant acquiring, gateway and aggregation fees.
Will KRA tax money in my M-Pesa account?
Only income is taxable, such as business earnings or rent. Transfers from family are not income.
Updated October 2026.
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