As of May, 2024, Kenya has two main digital taxes:
- Digital Service TaxDigital Service Tax (DST) Basics The Digital Service Tax is your new reality if you're engaging in the digital marketplace in Kenya. Set at a rate of (DST)
- Value Added TaxValue Added Tax (VAT) in Kenya is a consumption tax levied on the sale of goods and services. As of , the standard VAT rate is set at 16%. This tax is ... (VAT) on digital marketplace supplies (VAT DMS)
Here are some additional details about Kenya’s digital taxes:
- Effective date: Both the DST and VAT on digital marketplace supplies came into effect on January 1, 2021.
- Registration: Non-resident service providers without a permanent establishment in Kenya need to register and account for both DST and VAT DMS.
- Filing and payment: DST returns and payments are due monthly, by the 20th day of the following month that the service was offered. VAT compliance procedures also apply to digital marketplace supplies.
Types of digital tax in Kenya
a) Digital Service Tax (DST)
DST is a tax on income in Kenya fromdigital services offered through the internet, or an electronic network including digital marketplaces, applicable at a rate of 1.5% of the gross revenue, excluding VAT.
This tax is as a result of the amendment of the Income ACT.
It targets both resident and non-resident digital service and marketplace providers. DST is a final tax, meaning no other declarations can be made at the end of the year.
Introduced in 2020, the Digital Service tax came into effect on January 1st, 2021.
As of January 2021, only non-residents are required to pay the DST. If you are a tax resident, then you are exempted from paying the digital service tax on your accrued revenues.
b) VAT Digital Marketplace Supply (DMS)
VAT on Digital Marketplace Supply (VAT DMS) applies to taxable electronic, internet, or digital marketplace supplies in Kenya at a rate of 16%. It requires non-resident suppliers to register and account for VAT in Kenya, with no turnover threshold for registration.
In Kenya, the Value Added Tax (Digital Marketplace Supply) Regulations, 2020, operationalize the collection of VAT on digital marketplace supplies as outlined in the Value Added Tax Act, 2013.
This includes services provided on digital platforms like e-commerce, electronic services, downloadable digital content, subscription-based media, software programs, online gaming, and more.
If you run a digital marketplace model of a business, you are required to collect and remit VAT DMS, at 16% of the gross transaction value.
Foreign suppliers of digital services without a fixed place of business in Kenya are required to comply with VAT on DMS regulations, register for VAT, and remit taxes accordingly.
