Some banks and payment service providers have started charging 16% VAT on digital payment processing fees.
Here is how it works:
The tax applies to fees charged for processing card transactions, settling payments and handling electronic payments for businesses.
For example, if your business receives Sh1 million in card payments and the bank charges a 2.9% processing fee, you pay Sh29,000 in processing fees.
The new 16% VAT (16% of Sh29,000, which is Sh4,640) is added to the processing fee.
This brings the total cost to Sh33,640 (Sh29,000 + Sh4,640).
NB: [The VAT is charged on the processing fee, not the Sh1 million received.
Ordinary M-Pesa and Airtel Money transfers between individuals are exempt].
