The Income Tax (Digital Service Tax) Regulations, 2020

These regulations were gazetted in November 2020 and shall come into force on 2^nd January 2021.

Digital Services

Digital services for which digital service tax shall apply include—

• 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;

1. • Online distance training through pre-recorded media or elearning including online courses and training; and
   • Any other service provided through a digital marketplace.   

Location of user

A person shall be subject to digital service tax if that person provides or facilitates the provision of a digital service to a user who is located in Kenya. A user of a digital service shall be deemed to be located in Kenya if,

• The user receives the digital service from a terminal located in Kenya, where terminal includes a computer, tablet and mobile phone;
• The payment for the digital service is made using a debit or credit facility provided by a financial institution or company located in Kenya; 
• The digital service is acquired through an internet protocol address registered in Kenya or an international mobile phone country code assigned to Kenya; or 
• The user has a business, residential or billing address in Kenya.

Application of digital service tax

Digital service tax shall apply to the income of a resident or non-resident person derived from or accrued in Kenya from the provision of services through a digital marketplace.  It shall be imposed on the gross transaction value of the digital service at a rate of 1.5%.

Digital service tax paid by a resident or non-resident person with a permanent establishment in Kenya shall be offset against the tax payable by that person for that year of income.

Digital service tax paid by a non-resident person without a permanent establishment in Kenya shall be a final tax.

Compliance

A non-resident person without a permanent establishment in Kenya who provides a digital service to a user in Kenya may register under the simplified tax registration framework.

A resident person, or a non-resident person with a permanent establishment in Kenya, who provides a digital service in Kenya shall be required to apply to the Commissioner for digital service tax registration in the prescribed form.

A person liable to pay digital service tax shall submit a return in the prescribed form and remit the tax due by the twentieth day of the month following the end of the month that the digital service was offered.

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