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Kenya recently amended its Income Tax Act to introduce what is known as a digital service tax.[1] The amendment took effect on January 1, 2021.[2] The amendment adds a new section 12E to the Income Tax Act that states:

(1) Notwithstanding any other provision of this Act, a tax to be known as digital service tax shall be payable by a person whose income from the provision of services is derived from or accrues in Kenya through a digital market place:

Provided that a resident person or a non-resident person with a permanent establishment in Kenya shall offset the digital service tax paid against the tax payable for that year of income.

(2) The tax payable under subsection (1) shall be due at the time of the transfer of the payment for the service to the service provider.[3]

The amendment provides that the applicable rate of tax “in respect of digital service tax under section 12E shall be one point five per cent of the gross transaction value.”[4]

The Cabinet Secretary for National Treasury and Planning also recently issued the Income Tax (Digital Service Tax) Regulations, 2020, which also took effect on January 1, 2021.[5] According to the Regulations, digital services subject to digital service tax include:

(a) streaming and downloadable services of digital content, including but not limited to movies, videos, music, applications, online games and e-books;

(b) transmission of data collected about users which has been generated from such users’ activities on a digital marketplace, however monetized;

(c) provision of a digital marketplace, website or other online applications that link buyers and sellers;

(d) subscription-based media including news, magazines and journals; (e) electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;

(e) supply of search-engine and automated helpdesk services including supply of customized search engine services;

(f) tickets bought for live events, theatres, restaurants e.t.c purchased through the internet:

(g) online distance teaching via pre-recorded medium or elearning, including online courses;

(h) any other service provided or delivered through an online digital or electronic platform excluding any service whose payment is subject withholding tax under section 35 of the Act.[6]

Although neither the Act nor the Regulations expressly spell it out, an official with the Kenya Revenue Authority (the Kenyan version of the Internal Revenue Service in the United States) recently noted that the digital service tax would be applicable to cryptocurrency transactions.[7]

The remarks appear not to have addressed block rewards or reward tokens, however.

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Prepared by Hanibal Goitom
Chief, FCIL I
January 2021


[1] Finance Act No. 8 of 2020, § 4, Kenya Gazette Supplement (Special Issue), No. 104 (Jun. 30, 2020), https://perma.cc/E85Y-ZGKE

[2] Id. § 1.

[3] Id. § 4.

[4] Id.

[5] Income Tax (Digital Service Tax) Regulations, 2020, § 1, https://perma.cc/WMZ7-ZQH5.

[6] Id. § 3.

[7] Jeffrey Gogo, Foreign Crypto Exchanges Like Paxful, Binance to Pay 1.5% Tax under Kenya’s New Regulations, Bitcoin.com (Oct. 16, 2020), https://perma.cc/4Y7H-XPS7.

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Last Updated: 02/05/2021