Kenya’s Finance Bill 2025 has proposed reducing the Digital Service Tax (DST) from 3 per cent to 1.5 per cent, aligning it with the turnover tax, which the Bill states as “one point five per cent of the gross receipts of the business of a taxable person under section 12C”
The Bill defines digital services as “services supplied through a digital marketplace, including digital content, search engine services, social networking services, subscription-based media including news, digital marketplaces, and any other digital service provided through the internet or an electronic network”
It clarifies that the DST will not apply to “income that is subject to withholding tax or income subject to tax under Section 9(2) of the Income Tax Act, or income that accrues to a non-resident with a permanent establishment in Kenya”
Additionally, the Bill introduces provisions allowing the Commissioner to appoint an agent “for the purpose of collection and remittance of digital service tax to the Commissioner” and notes that “an appointment under subsection (1) may be revoked at any time by the Commissioner”
Beyond the DST, the Finance Bill 2025 outlines broader tax changes, including amendments to the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, and the Miscellaneous Fees and Levies Act.
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According to the Bill’s memorandum, it has been submitted “by the Cabinet Secretary for the National Treasury and Economic Planning and formulates proposals relating to revenue raising measures including liability to, and collection of taxes”
If approved by Parliament, most provisions, including the reduced DST, are set to come into effect on July 1, 2025, while sections 12 and 56 will commence on January 1, 2026
