The Treasury will reintroduce the 6% Significant Economic Presence (SEP) which will affect online ride-hailing platforms and delivery apps, according to the Tax Laws (Amendment) Bill, 2024.
- The SEP tax was ingrained in the Finance Bill 2024, rousing discontent from ride-hailing platforms such as Bolt and Uber, who cited that it would negatively affect their operations if passed.
- The SEP tax will replace the Digital Service Tax, which was charged at 1.5% for all businesses within the stipulated market.
- The Tax Laws (Amendment) Bill, 2024, will also broaden the scope of the digital marketplace to include food delivery and online freelance services.
- “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,” the bill states.
During a public participation process in June this year, representatives from the ride-hailing industry told parliamentarians that the 6% SEP on gross turnover would force them to hike fares, haemorrhage customers, and crater their revenues. They also said that it would disincentivize foreign multinational companies from pegging their investments into the country.
“By introducing the 6% Significant Economic Presence Tax, the effective rate for a non-resident in the digital market space will be 22% on gross turnover without taking into consideration the operating costs,” George Abasy, Bolt’s Public Policy Manager said at the time.
In the Finance Bill 2024, the withholding tax for resident persons supplying goods to government offices was set at 0.5%. The repeal of the Finance Bill was a big blow to the government, which glared at a deficit of almost KSh 346 billion.
