The National Treasury has moved to clarify several tax proposals contained in the Finance Bill, 2026, following public debate and media reports that it says have mixed current proposals with measures from previous finance bills.
In a press release issued by Treasury Cabinet Secretary John Mbadi, the ministry said the Finance Bill, 2026 should not be confused with earlier tax proposals, including some contained in the withdrawn Finance Bill, 2024. Treasury said proposals such as VAT on bread, motor vehicle circulation tax, access to mobile money transaction data and the 2024 eco levy on phones are not part of the current Bill.
A major focus of the clarification was the proposed 25 percent excise duty on mobile phones. Treasury said the measure has been inaccurately portrayed as a new tax targeting young people, digital access and online livelihoods.
According to the ministry, mobile phones are already subject to several taxes and levies, including 16 percent VAT, 10 percent excise duty, 25 percent import duty, 2.5 percent Import Declaration Fee and 2 percent Railway Development Levy. Treasury said these charges create an aggregate tax burden of about 55.5 percent under the current system.
The ministry said the Finance Bill proposal seeks to simplify the structure by replacing the existing fragmented tax framework with a single 25 percent excise duty collected when a phone is activated. If enacted, Treasury said phones would no longer be subject to VAT, the Import Declaration Fee, the Railway Development Levy and, upon implementation of the new regime, the 25 percent import duty.
“The proposal was therefore primarily conceived as a tax simplification and rationalization measure rather than the introduction of a new tax on digital access,” the statement said.
Treasury also addressed proposed reporting requirements for virtual asset service providers. It said the rapid growth of digital and virtual asset transactions had created gaps in the legal framework because of the absence of clear reporting obligations. The proposed amendments to the Tax Procedures Act are intended to introduce record-keeping and reporting standards similar to those already applied in traditional financial and commercial activities.
On digital payments and card transactions, Treasury said the Finance Bill seeks to clarify the tax treatment of fees charged on digital payment processing and card transaction services. The ministry said the changes are meant to address uncertainty over whether technology-based payment services should be treated as exempt financial services or ordinary commercial services for tax purposes.
Treasury further clarified that the Finance Bill, 2026 does not introduce a 5 percent withholding tax on digital content monetisation, contrary to some media reports.
The statement also said the Bill seeks to clarify taxation of card-related fees, including interchange fees and payments made by banks to card companies. Treasury said a recent court ruling found that such payments did not attract withholding tax under current law, creating what it described as a gap in taxing income from card payments.
On mobile money and payment platforms such as M-Pesa and PesaPal, Treasury said the issue relates to the VAT treatment of modern digital intermediaries and technology-based platforms, not traditional financial services such as cash deposits, withdrawals and foreign exchange.
The ministry said it had engaged Safaricom and clarified that the company was not among the entities targeted by the proposal.
Treasury also noted that an earlier proposal to exempt the first KSh30,000 of employment income from PAYE did not make it into the Finance Bill, 2026, though it remains under consideration by technical teams.
The National Treasury said it remains committed to maintaining a balanced fiscal framework that supports revenue mobilisation, economic growth, investment, innovation and long-term sustainability while taking public concerns into account.
It encouraged Kenyans to continue participating in the ongoing parliamentary process on the Finance Bill, 2026.
