- Tribunal ruling: Kenya’s Tax Appeals Tribunal held that switching services offered by payment service providers (PSPs) — involving routing and authorizing financial transactions — qualify as financial services and are therefore exempt from VAT.
- Key reasoning: VAT exemption depends on the nature of the service, not on the provider’s licensing under the Banking Act or the use of digital platforms. The Tribunal emphasized the integrated role of PSPs in completing financial transactions.
- Implications: The decision reinforces that digital payment facilitation is treated as a financial service for VAT purposes, providing clarity for Kenya’s fintech sector and reducing uncertainty around tax treatment of PSPs.
Source EY
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