Treasury proposes new tax regime targeting digital services sector
The Treasury has unveiled a legislative proposal to reform the taxation of digital services in Kenya, introducing a 6 percent Significant Economic Presence Tax (SEPT) aimed at broadening the tax base
The Treasury has unveiled a legislative proposal to reform the taxation of digital services in Kenya, introducing a 6 percent Significant Economic Presence Tax (SEPT) aimed at broadening the tax base.
The new proposal targets ride-hailing platforms, digital food delivery companies, and online freelance jobs, replacing the current Digital Service Tax, which stands at 1.5%. The new 6% rate would apply to non-resident entities earning income through digital marketplaces in Kenya.
“This tax shall be payable by a non-resident person whose income from the provision of services is derived from or accrues in Kenya through a business carried out over the digital marketplace,” read a notice from Treasury Cabinet Secretary John Mbadi.
Treasury stated that the SEPT is intended to ensure foreign companies generating revenue through digital services in Kenya are taxed equitably, aligning with international standards.
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By targeting significant economic activities conducted by non-resident entities, the government aims to boost revenue collection from the expanding digital sector.
The proposed legislation also includes a Minimum Top-Up Tax to address tax base erosion among multinational enterprises (MNEs).
This measure sets a minimum effective tax rate of 15% for companies with a consolidated annual turnover exceeding 100 billion shillings.
Companies paying less than this rate will be required to top up their tax contributions to meet the threshold.
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