Kenya’s Finance Act 2020 introduced Digital Service Tax (DST) as a tax that is payable on income derived or accrued from services offered through a digital marketplace in the country.
The Digital Tax in Kenya became effective on 1st January 2021.
DST is payable at 1.5% of the gross transaction value and is due at the time of transfer of the payment for the service to the service provider. For residents and companies with a Permanent Establishment (PE) in Kenya, the DST will be an advance tax to be offset against the income taxes due in the course of the financial year while for non-residents and companies without a Permanent Establishment in the country, the Digital Services Tax will be a final tax.
According to the Kenya Revenue Authority (KRA), Digital Tax is chargeable to services and not goods.
Who should pay for the Digital Tax in Kenya?
Resident and Non – Resident:
- Digital service providers
- Digital market place providers, or
- Their appointed tax representatives (in the case of non-residents digital service providers or digital marketplace providers without a permanent establishment in Kenya)
Services Chargeable under Digital Service Tax in Kenya
- downloadable digital content including downloadable mobile applications, e-books and films;
- over-the-top services including streaming television shows, films, music, podcasts and any form of digital content;
- sale of, licensing of, or any other form of monetising data collected about Kenyan users which has been generated from the users’ activities on a digital marketplace;
- provision of a digital marketplace;
- subscription-based media including news, magazines and journals;
- electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;
- electronic booking or electronic ticketing services including the online sale of tickets;
- provision of search engine and automated held desk services including supply of customised search engine services;
- online distance training through pre-recorded media or e-learning including online courses and training; and
- any other service provided through a digital marketplace.