Introduction

On 27th August 2025, the High Court of Kenya delivered a significant ruling in Income Tax Appeal No. E081 of 2023 – Pesapal Limited vs Commissioner of Domestic Taxes. The Court set aside the earlier decision of the Tax Appeals Tribunal (TAT), which had held that Pesapal’s services were not VAT-exempt financial services.


In its judgment, the Court held that Pesapal’s activities fall within the scope of Paragraph 1(b) (issue, transfer, receipt or dealing with money) and Paragraph 1(m) (financial services provided on a commission basis) of Part II of the First Schedule to the VAT Act. This decision is a turning point for fintechs, payment service providers (PSPs), and merchants in Kenya.
 

Caveat

This newsletter has been prepared by RSM (Eastern Africa) Consulting Ltd, and the views are those of the firm, independent of its directors, employees and associates. This newsletter is for general guidance, and does not constitute professional advice. Accordingly, RSM (Eastern Africa) Consulting Ltd, its directors, employees, associates and its agents accept no liability for the consequences of anyone acting, or refraining from acting, in reliance on the information contained herein or for any decision based on it. No part of the newsletter may be reproduced or published without prior written consent. RSM (Eastern Africa) Consulting Ltd is a member firm of RSM, a worldwide network of accounting and consulting firms. RSM does not offer professional services in its own name and each member firm of RSM is a legally separate and independent national firm.

 

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