Kenya is tightening its grip on the fast-growing digital economy with fresh proposals targeting global technology companies.
The National Treasury has published the Income Tax (Significant Economic Presence Tax) Regulations, 2025, which seek to levy a final tax on foreign firms providing digital services to Kenyans, regardless of whether they have offices in the country.
The proposed framework expands Kenya’s digital taxation scope, capturing services that have become part of everyday life.
These include artificial intelligence (AI) platforms, search engines, video and music streaming, cloud hosting, e-learning, online ticketing, ride-hailing apps, digital advertising, and online marketplaces.
Companies like Netflix, Google, TikTok, Amazon Web Services, Airbnb, Coursera, and ChatGPT are among those that may be required to remit taxes on revenue generated from Kenyan users.
Treasury officials argue that the regulations are necessary to ensure equity in the tax system.
While local firms are taxed on income, multinational digital giants have long operated in Kenya without paying comparable taxes, despite earning significant revenues from the local market.
By using indicators such as local IP addresses, billing details, and Kenyan payment systems, the regulations create a basis for identifying and taxing these companies.
This move mirrors a global trend where governments are racing to close loopholes that allow tech giants to shift profits across jurisdictions.
Countries in Europe, Asia, and Africa have introduced or proposed similar measures, pending broader consensus from the Organisation for Economic Co-operation and Development (OECD) on international digital tax reforms.
Kenya’s approach underscores its determination to safeguard revenue in an increasingly digitalized economy.
However, stakeholders warn that implementation must be carefully handled to avoid double taxation, compliance burdens, or discouraging digital innovation.
If enacted, the Significant Economic Presence Tax could reshape the operating environment for foreign tech firms and reinforce Kenya’s position as a pioneer in taxing the digital economy in Africa.
