NAIROBI, Kenya, July 15 – Digital lenders say an unresolved tax dispute with the Kenya Revenue Authority (KRA) continues to create uncertainty for the sector despite the enactment of the Finance Act 2026.
The Digital Financial Services Association of Kenya (DFSAK) said a High Court appeal involving historical tax claims dating back to December 2022 remains active, with the next hearing expected in September.
The association argues that while Parliament approved several tax reforms sought by the industry, the ongoing litigation continues to weigh on investment planning.
“Our objective was simple: protect the digital financial services ecosystem that millions of Kenyans depend on. Six of our submissions are now law,” said DFSAK Chairman Kevin Mutiso.
“This is real progress, but it is progress on individual provisions, not a settled tax environment. We will keep pressing for the long-term certainty the sector and its customers need to plan with confidence.”
Among the changes adopted in the Finance Act are the removal of a proposed deemed dividend tax on retained earnings, retention of tax incentives for locally assembled smartphones, enhanced bad debt deductibility for lenders, and the rejection of proposals that would have allowed KRA to enforce tax collection while appeals were still pending before the courts.
However, DFSAK said the reforms do not fully resolve concerns over the tax treatment of retained earnings.
Although the proposed 60 percent deemed dividend tax was dropped, the association said KRA continues to scrutinise how companies retain and deploy profits.
It said the continued scrutiny has prompted lenders to strengthen documentation showing retained earnings are reinvested in technology, lending capacity and expansion into underserved markets rather than being used to avoid tax.
The association added that it will continue engaging KRA to develop clearer tax guidelines for the sector.
Beyond the sector-specific reforms, DFSAK noted that the wider tax environment remains largely unchanged after PAYE tax bands were left untouched and several withholding tax proposals were retained under the Finance Act.
Deloitte East Africa Associate Director and Tax Policy Lead Fred Kimotho said the reforms demonstrate the value of evidence-based engagement between policymakers and industry.
The reforms followed months of consultations between DFSAK, which represents 35 licensed digital credit providers, and Parliament’s Departmental Committee on Finance and National Planning during consideration of the Finance Bill 2026.
