PSPs are widely used by sports betting<\/strong> and online gaming operators<\/strong> to process player deposits, withdrawals and other transactions. Analysts say the ruling could reduce operating costs for gaming platforms, improve payment efficiency<\/strong> and make the Kenyan market more attractive for new entrants.<\/p>\n\n\n\n The decision overturned a Tax Appeals Tribunal ruling that allowed the Kenya Revenue Authority (KRA) to pursue a KES76.8m (\u20ac412,000) VAT claim<\/strong> against Pesapal.<\/strong><\/p>\n\n\n\n Kenya High Court Judge Rhoda Rutto<\/strong> found that companies licensed as PSPs under the National Payment System Act are entitled to the same VAT exemptions<\/strong> granted to commercial banks.<\/p>\n\n\n\n \u201cThe VAT Act neither restricts eligibility for exemption based on the technology used, nor does it tie exemption to registration under the Banking Act. The Appellant\u2019s (Pesapal\u2019s) activities-facilitating merchant payments<\/strong>, processing client funds, storing balances and executing payment instructions-are functionally equivalent to and mirror those of financial institutions<\/strong>, albeit in a digital environment<\/strong>\u201d, said Rutto, according to TechCabal.<\/p>\n\n\n\n The ruling effectively classifies licensed fintech operators<\/strong> as providers of financial services rather than technology firms. For the gaming sector, this could mean lower transaction costs<\/strong> and fewer tax disputes over deposits and payouts.<\/p>\n\n\n\n The KRA<\/strong> had argued that Pesapal\u2019s licence only authorised it to offer a payment system, not financial services, and that VAT exemptions should be strictly limited to traditional financial institutions.<\/p>\n\n\n\n Justice Rutto countered that the VAT Act was \u201cclearly intended to capture a wide array of monetary operations<\/strong>, particularly those that facilitate the movement of funds\u201d.<\/p>\n\n\n\n Industry experts say the decision could encourage greater investment<\/strong> into Kenya\u2019s gaming and igaming markets by giving operators more predictable costs and aligning fintech services with banks and mobile money providers. Lower taxes on PSP transactions may translate into more efficient deposits and withdrawals for players, improving overall platform operations<\/strong>.<\/p>\n\n\n![\"\"](\"https:\/\/focusgn.com\/africa\/wp-content\/uploads\/sites\/7\/2025\/09\/JUDGE22.jpg\")
Court affirms PSPs as financial services<\/h2>\n\n\n\n
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