LEGAL ALERT: Digital Service Tax Under The Kenya Budget 2021

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On 10th June 2021, The National Treasury & Planning Cabinet Secretary Hon. Amb. Ukur Yattani presented the budget for the  2021/2022 financial year amidst the country’s efforts to navigate the challenges associated with the COVID-19 Pandemic.  

Notably, the budget set out measures on the Digital Service Tax regime which was introduced through the Income Tax (digital service tax) Regulations 2020 and which has been in effect since 1st January 2021. Our comments on the regulations can be found on    

New measures regarding the digital service tax  

First, the definition of “digital marketplace” is set to be expanded in order to cover any “online platform which enables users to sell or provide services, goods or other property to other users” 

In addition to this, the scope of application of digital service tax shall be extended to any income from a business carried over the internet or an electronic network, including through a digital marketplace unlike now when digital service tax only applies on the income accruing through a digital marketplace.  

The budget further introduced new measures regarding the Digital Service Tax which are effective from 1st July 2021. These include: 

  1. Resident persons are now exempted from the digital service tax (DST) regime. The tax was previously applicable on the income of both resident and non-resident persons from the provision of services through a digital marketplace.  
  1. The due date for paying digital service tax is to be aligned with the due date for filing the digital service tax return. Previously, the regime required the digital service tax to be paid at the point of paying the digital service provider. However, the budget introduced a reprieve under the new law where a person may defer the payment of DST up to 20th of the following month. 
  1. The income taxable under Section 9(2) and Section 35 of the Income Tax Act to be exempt from digital service tax. Section 9(2) refers to income of a non-resident person who carries on the business of transmitting messages by cable or radio communication, optical fibre, television broadcasting, Very Small Aperture Terminal (VSAT), internet or any other similar method of communication. Section 35 provides for incomes that are liable to withholding tax in Kenya. 


We note that the new measures widen the scope of income subject to the digital service tax in a bid to increase revenue. However, we also note that the measures lay less burden on residents by extending exemptions and providing flexible administrative deadlines in remitting the tax. This is a positive move, and we anticipate that it will enable business expansion in the eco-system. 

For further information on the digital services tax please contact 


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