The National Treasury is set to increase Digital Service Tax (DST) from the current 1.5% to 3% of the gross value of online transactions, with effect from 1st July 2022.
Under the current 1.5% tax, the KRA had targeted KSh13.9 billion in three years ending June 2024, projecting gross revenue to be generated by foreign firms in Kenya’s digital marketplace at about KSh926 billion.
The forecast for DST collections now comprises KSh3.4 billion this fiscal year ending in June, KSh5 billion next financial year, and KSh5.5 billion in the one that ends in June 2024.
The tax is levied on the sale of e-books, movies, music, games and other digital content and applies to foreign companies. This includes foreign tech giants like Amazon, Netflix, Twitter and PayPal which use the internet to market and sell products
Online services from the government and online services that facilitate payments, lending, or trading of financial instruments, commodities, or foreign exchange, carried out by a licensed financial institution or financial services provider do not attract the Digital Service Tax.
The tax first took effect on 2nd January 2021, despite outrage from citizens.