The Kenya Revenue Authority (KRA) is seeking new powers to collect revenue from foreign technology companies, including the ability to order local banks, payment processors and even customers to withhold and remit taxes on behalf of non-compliant firms.
- •The proposal is contained in draft Income Tax (Significant Economic Presence) Regulations, 2025, which would replace the lapsed Digital Service Tax, with a broader regime targeting companies that earn money from Kenyan users without maintaining a physical office in the country.
- •Under the new rules, the Kenya Revenue Authority (KRA) could issue written instructions directing financial institutions or other intermediaries to deduct tax owed by foreign providers of digital services and transfer the funds directly to the government.
- •About 10% of a firm’s gross turnover from Kenyan users would be deemed taxable profit, then taxed at the 30% corporate income rate, translating into an effective 3% levy on revenues.
The regulations broaden the scope of taxable services far beyond streaming and app downloads, pulling in cloud computing, online education, ride-hailing, accommodation platforms, AI tools, digital asset exchanges, and services that monetize user data. Firms such as Netflix, Amazon, OpenAI, Airbnb and Uber could all fall within KRA’s net if they earn revenues from Kenyan users.
A company would be deemed to have a “significant economic presence” in Kenya if its services are accessed through a Kenyan IP address, paid for with a Kenyan credit card or mobile money account, or billed to a Kenyan address.
Non-resident companies would be required to register under a simplified framework or appoint a local tax representative to handle compliance. Penalties and interest would apply for late or missed payments.
The Likely Road Ahead
Based on this outlook, the burden of taxation will likely be passed on to consumers. Subscription fees for Netflix or Spotify, transaction costs on ride-hailing apps, and cloud service pricing may all creep upward as the global firms adjust to the tax.
Kenya is positioning itself among the most assertive emerging markets in taxing the digital economy. Its approach echoes the broader global debate under the OECD’s Pillar One framework, where countries are committed to stem profit shifting and base erosion by multinational corporations.
However, the unilateral tax raises the risk of friction with the U.S. and Europe, which have previously termed such taxes as unfair and discriminatory to their businesses. Washington has previously threatened to enact tariffs against countries such as France and India for imposing unilateral digital taxes.
By conscripting local banks and businesses into the role of tax enforcers, the rules risk rattling financial institutions and unsettling corporate partners.
