OpenAI will begin charging a 16% value-added tax (VAT) on ChatGPT invoices for users in Kenya starting May 1, 2025, marking another addition to the country’s increasingly aggressive push to tax digital services. The announcement, sent via email to Kenyan users, advises them to update their tax status with a valid Kenya Personal Identification Number (PIN) to ensure compliance and proper invoicing going forward.
“In compliance with Regulation 3 of the VAT EIDMS Regulations, we will be required to charge and collect a VAT of 16% on your invoice,” OpenAI wrote in the notification.
This move places OpenAI, the maker of ChatGPT and other generative AI tools, among a growing list of global digital service providers now compelled to charge VAT in Kenya, following similar paths taken by Netflix, Google, Meta, and others.
Kenya’s Increasingly Tax-Heavy Approach to Digital Services
The Kenya Revenue Authority (KRA) has been ramping up efforts to widen the tax net over the past few years, targeting the booming digital economy with new levies and compliance requirements. These include:
- VAT on digital services for foreign firms.
- Excise duties on mobile loans and airtime.
- Digital Service Tax (which was recently suspended).
- A new push for real-time tax invoice management (EIDMS) integration by May 2025.
Despite Kenya positioning itself as a future-ready digital economy, the heavy-handed tax policies — especially on internet-based tools and platforms — are raising concern. These taxes are being imposed even as the country struggles with high inflation, rising cost of living, and a growing digital divide.
A Contradiction to Kenya’s Ambitious AI Strategy
Earlier this year, the Kenyan government launched the National Artificial Intelligence Strategy 2025–2030, which aims to boost local innovation, attract investment, and create a favorable environment for AI development and deployment.
Yet, while the policy document celebrates AI as the “future of productivity, governance, and economic growth,” the practical reality seems to be working against that goal. By taxing essential AI tools like ChatGPT, Kenya risks making access to these technologies more expensive for individuals, startups, developers, and educators — the very groups the strategy purports to empower.
It also raises a deeper contradiction: How can a country champion digital innovation while simultaneously making it costlier to access the digital infrastructure that drives that innovation?
An Unfriendly Climate for Digital Tools
While it’s understandable for governments to seek revenue in the digital age, Kenya’s approach feels increasingly extractive rather than supportive. Instead of reducing barriers to adoption, the tax regime seems to add more.
The VAT on OpenAI tools, for instance, will likely affect:
- Small businesses using ChatGPT for content, coding, and automation.
- Students and researchers accessing AI tools for learning.
- Developers experimenting with OpenAI’s APIs.
Rather than investing in digital inclusion and subsidizing access to productivity-enhancing platforms, the tax appears to penalize usage. This could deepen the divide between those who can afford to explore cutting-edge tools like AI and those who cannot.
Kenya Keeps Taxing — But Where’s the Value?
Over the past few years, Kenyans have witnessed a steady expansion of what is being taxed — from bread and M-Pesa transactions to streaming services and now AI. Many citizens and digital professionals are growing increasingly frustrated with the lack of meaningful digital public services in return.
The introduction of VAT on OpenAI services is yet another example of how Kenya’s tax policies are outpacing its delivery of public digital infrastructure. With no subsidies, incentives, or support programs for tech users or developers, the tax feels more like a cash grab than a strategy.
Discover more from Techish Kenya
Subscribe to get the latest posts sent to your email.
