In a bold move aimed at reshaping its digital economy, the Treasury has put forth a proposal for a Significant Economic Presence Tax (SEPT) that will see foreign digital companies facing a substantial increase in taxation.

The proposed tax, which would rise from the current 1.5 per cent to a striking 6 per cent, is set to impact a diverse array of online service providers, from ride-hailing and food delivery apps to freelance platforms.

Treasury Cabinet Secretary John Mbadi highlighted the tax's intention, stating, “This tax shall be payable by a non-resident person whose income from services is derived from or accrues in Kenya via a digital marketplace.”

This change aims to ensure that international firms profiting from Kenyan consumers contribute their fair share to the nation’s coffers, aligning local tax practices with global standards.

Moreover, the initiative is not limited to SEPT.

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The Treasury has also proposed a Minimum Top-Up Tax, designed to impose a mandatory effective tax rate of 15 per cent on multinational enterprises (MNEs) boasting annual turnovers exceeding Sh100 billion.

Companies that do not meet this benchmark will be required to “top up” their tax obligations, effectively countering any attempts at tax base erosion.

These proposed changes mark a significant shift in Kenya’s approach to taxation within the digital realm.

They reflect a commitment to modernising the tax landscape and enhancing revenue generation from multinational corporations operating within its borders.

As Kenya takes this significant step, the implications for foreign businesses and the local economy remain to be seen, but the drive towards a more equitable tax system is undoubtedly gaining momentum.