Kenya has introduced new regulations replacing the 1.5% Digital Services Tax with a 3% Significant Economic Presence Tax on gross turnover, setting out the scope of taxable digital services, exemptions, registration requirements and compliance obligations for non-resident providers.

RF Report

Kenya has released the Income Tax (Significant Economic Presence Tax) Regulations 2026. The regulations were issued by the Cabinet Secretary for the National Treasury on 12 August 2026 and gazetted on 18 September 2026.

Introduced under the Tax Laws (Amendment) Act 2024 and expanded by the Finance Act 2025, the Significant Economic Presence Tax (SEPT) formally replaces Kenya’s previous 1.5% Digital Services Tax (DST). Under these regulations, the original Income Tax (Digital Service Tax) Regulations are revoked, and entities previously registered under DST are automatically deemed registered under SEPT.

Scope and exemptions

SEPT is levied as a final tax on income accrued in or derived from Kenya by non-resident persons offering digital or electronic services. A non-resident provider is deemed to have a significant economic presence in Kenya whenever the user of their service is located within the country. The regulations explicitly exempt three specific categories of income:

  1. Income derived through a permanent establishment (PE) in Kenya.
  2. Income chargeable under Section 9(2) or Section 10 of the Income Tax Act.
  3. Income from services provided to an airline in which the Kenyan Government maintains at least a 45% shareholding.

Taxable digital services

The regulations establish a comprehensive scope covering services delivered or subscribed to over the internet, electronic networks, or digital marketplaces. Taxable services include:

  • Downloadable content and media: Mobile applications, eBooks, films, subscription-based journals, newsmagazines, and streaming of music, games, podcasts, and audio-visual content.
  • Software and data management: Software programs, drivers, firewalls, cloud computing, website hosting, online data warehousing, and file sharing.
  • Search, AI, and online education: Search engine queries, automated helpdesks, artificial intelligence (AI) services, eLearning, webinars, and online educational courses.
  • Digital platforms and financial operations: Transport hailing, travel and accommodation marketplaces, event ticketing, user data monetisation, payment facilitation, and digital asset exchanges or transfers.
  • General catch-all: Any other service offered online or over electronic networks that is not specifically exempt under the Act.

User location criteria

A service user is legally considered to be located in Kenya if any one of the following criteria is met:

  • The service is accessed using a terminal or device located in Kenya.
  • Payment originates in Kenya via local payment systems, debit/credit cards, or digital wallets.
  • The service is acquired via a Kenyan-registered IP address or communication network originating from Kenya.
  • The transaction utilises a Kenyan telephone country code (+254).
  • The user provides a business, residential, or billing address located in Kenya.

Tax calculation and rate

SEPT is computed on a statutory deemed profit base rather than net profit:

  • Deemed taxable profit: Deemed to be 10% of gross turnover.
  • Tax rate: Charged at 30% of the deemed taxable profit, resulting in an effective tax rate of 3% on gross turnover.
  • Gross turnover base: Defined as the consideration received for services or commissions/fees paid to marketplace providers, strictly excluding Value Added Tax (VAT).

Registration and compliance obligations

Non-resident providers without a PE in Kenya must register for a PIN under a simplified framework or appoint a local tax representative. SEPT returns and payments are due by the 20th of the following month.

Taxpayers or their representatives must submit returns and remit the tax due by the 20th day of the month following the month in which the income was derived. Overpaid taxes may be credited against future SEPT liabilities or refunded upon business cessation under Section 47 of the Tax Procedures Act.

Taxpayers must also maintain transaction records in accordance with the Tax Procedures Act.