The Kenya Revenue Authority (KRA) collected Sh2.3 billion from 454 foreign digital service providers operating in the country by the end of August 2025, solidifying its push to maximise benefits from the earnings of multinationals without local subsidiaries.
A significant portion of the amount came from the 1.5 percent Digital Service Tax (DST) that Kenya implemented in June 2020, before it was replaced by the Significant Economic Presence (SEP) Tax, according to KRA data.
Nickson Omondi, manager in charge of KRA’s Digital Economy-Tax office, noted that around Sh300 million came from the SEP Tax, which took effect last December.
He said the registrations are for both DST and SEP. “Taxpayers automatically transitioned (from DST to SEP),” said Omondi, noting that some of the services charged were those provided for purposes of downloading, streaming services players, about eight software companies, and security software for some of the providers.
Treasury Cabinet Secretary John Mbadi has since published regulations on SEP Tax for public participation.
The regulations will become operational within six months after being published.
Kenya’s first attempt to tax services offered under the digital marketplace was six years ago, though there was no mention of “digital service tax” in the Finance Act of 2019. DST, which was charged at 1.5 percent of gross turnover, took effect the following year. In 2021, residents were exempted from DST.
Introduced through amendments to the Income Tax Act, the SEP Tax is charged at 30 percent of a deemed profit equal to 10 percent of gross turnover, which effectively means companies pay three percent of gross turnover earned from digital services in Kenya.
Global tech giants such as Amazon, Microsoft, Netflix, Facebook, and Alibaba operate in Kenya through the Internet without a physical presence, and so do not pay income tax under traditional permanent-establishment rules.
Data from the United Nations Conference on Trade and Development places Kenya as the third-largest e-commerce market in Africa, behind South Africa and Nigeria.
Ride-hailing services offered by Estonian-based Bolt and US-based Uber are some of the companies already paying SEP. Global subscription-based streaming service Netflix is the other tech giant that will be paying as an increasing number of Kenyans pay it to stream movies.
Under the draft regulations on SEP, these companies will be required to open an account with a local bank to qualify for refunds on overpaid taxes when shutting down, with the government noting that this is an improvement from the current scenario, where they have no way of recovering surplus payments.
The refund clause is designed to address situations where a company amends a return, finds it has overpaid, and is in the process of exiting the Kenyan market. In those cases, any cash refund would flow only through a bank account with a Kenyan institution, including an account of a related Kenyan entity, once the KRA is notified in writing and indemnified.
The draft points to routine administrative requirements for non-resident providers, including registration and providing basic contact details to the KRA.
