Kenya was one of the first African countries to tax digital services. Its rules have changed twice in two years, and many local freelancers and businesses wonder whether they are affected. For most residents the answer is no, but the details matter.

From digital service tax to SEP tax

The digital service tax (DST) was charged at 1.5% of the gross transaction value of services provided over the internet and electronic networks by non-residents to people in Kenya.

The Tax Laws (Amendment) Act, 2024 repealed DST and replaced it with a significant economic presence (SEP) tax, which has an effective rate of 3%. It is charged on the income of non-residents who have a significant economic presence in Kenya through digital services, with the rate applied to a deemed profit.

The 2025 widening

The Finance Act, 2025 extended SEP tax to all income of non-residents from the provision of services over the internet or an electronic network, and removed the earlier threshold of KES 5 million of turnover. Draft regulations on the details were published for public comment, so the rules on how it is applied continue to develop.

Who pays

SEP tax is a tax on non-resident businesses that earn from Kenyan users, such as streaming platforms, online marketplaces, software and cloud services and advertising platforms. It is not a tax on Kenyan residents who use them, and a Kenyan freelancer is not charged SEP tax.

What it means for Kenyan creators and freelancers

What it means for Kenyan businesses

If you pay a foreign digital service provider, for example for software, advertising or hosting, check whether tax is withheld, whether VAT applies and how to claim any input VAT. Record the invoices, which form part of your costs; see expenses small businesses can deduct. The withholding tax annual summary keeps tax withheld from suppliers separate from tax withheld from you.

A word on VAT

Digital services supplied by non-residents to Kenyan consumers may also attract VAT, which the supplier or a local representative must account for. Check the current rules with KRA.

What to do

  1. If you earn from foreign platforms, keep your payout statements and register for tax; see how to get a KRA PIN.
  2. If you buy foreign digital services for your business, ask your accountant about withholding and VAT.
  3. Keep up with the draft SEP regulations if you operate a platform; see how to follow tax changes in Kenya.

If you want to see how foreign platform income compares with other routes, the turnover versus annual tax comparison workbook takes twelve months of income and costs and shows which costs less. Businesses that pay foreign suppliers should also read how to follow tax changes in Kenya, because the regulations that explain how the tax is applied were still being developed.

Tax on digital services is changing quickly. Confirm the current rules with KRA and a registered tax adviser.