Kenya’s tax on foreign digital platforms doubled to 3%. Here is what actually changed

The Kenya Revenue Authority collected KES 2.844 trillion in the year to 30 June 2026. Buried in the detail is a tax called Significant Economic Presence Tax, or SEPT, which brought in KES 1.609 billion. The year before it brought in KES 807 million.

That is 0.06% of the total. Excise duty on betting services brought in ten times more.

SEPT is how Kenya taxes companies that sell you things over the internet without having an office here. Its rules changed twice between December 2024 and July 2025, and the second change landed on the first day of the year KRA has just reported on.

Start with what you actually pay

Take a Spotify Individual subscription at KES 419 a month, the price since February.

Kenyan rules require a foreign digital supplier to charge 16% VAT, and that VAT is inside the advertised price rather than added at the till. So KES 58 of your KES 419 is VAT. You have always paid it and the rate has not moved.

SEPT is charged on what is left, the KES 361 the platform actually books, and it is charged to the platform, not to you. At 3% that comes to about KES 11 a month. Under the old rules it was about KES 5.

Nothing about that KES 11 appears on your receipt. It is a bill the company pays out of its own revenue. Whether it quietly rebuilds the cost into the price is a commercial decision, and no platform has said publicly what it decided.

Spotify’s February increase is a useful warning against joining the dots too quickly. It raised prices in the US, Estonia and Latvia in the same round and pointed to value for fans and artists. It said nothing about Kenyan tax. Nobody has shown SEPT moved a single Kenyan subscription price.

Where the tax came from

Kenya’s income tax system was built around physical presence. A company with an office here pays 30% on its profits. A company selling in from a server abroad had no office to tax, and withholding tax, the older workaround, only caught particular kinds of payment and missed consumer subscriptions.

Digital Service Tax was the first purpose-built answer, effective January 2021 under the Finance Act 2020. It charged non-resident digital companies 1.5% of Kenyan earnings, but only above KES 5 million a year, and only on sales through a digital marketplace.

The Tax Laws (Amendment) Act 2024 repealed DST on 27 December 2024 and put SEPT in its place. KRA deems 10% of a foreign platform’s Kenyan turnover to be profit, then taxes that at the standard 30% corporate rate, which works out at 3% of gross. EY, Deloitte, Cliffe Dekker Hofmeyr and BDO all read the draft regulations that way.

No deductions are allowed, so the 3% applies to gross receipts whether the company made money in Kenya or lost it. It is also a final tax. Nothing further is owed on that income. For a marketplace the taxable amount is only the commission the platform keeps, not the value of goods sold through it.

Then the Finance Act 2025 removed the KES 5 million floor from 1 July 2025, so a foreign company owes SEPT on its first shilling of Kenyan income. It widened the wording from “digital marketplace” to any service delivered over the internet or an electronic network. KRA’s draft regulations name streaming, cloud computing, artificial intelligence, digital payments, digital assets and data monetisation.

An IP address, a SIM country code, a billing address or the payment channel is enough on its own to make you a Kenyan user.

Who escapes it

A non-resident that operates through a permanent establishment in Kenya is exempt. Its income already goes through the normal 30% corporate tax via that local presence, so any foreign platform with a registered Kenyan office or branch sits outside SEPT entirely.

Income already caught by withholding tax is out too, covering royalties, management and professional fees, interest and rent. So is the business of transmitting messages by cable, radio, optical fibre, satellite or television broadcasting. There is also an exemption for digital services supplied to an airline at least 45% owned by the government, which means Kenya Airways.

The office exemption has an odd effect. SEPT takes 3% of gross while corporate tax takes 30% of actual profit, and those come to the same figure at a 10% margin. A platform doing better than a 10% margin in Kenya hands over less under SEPT than it would on its real profits. Below that line the arithmetic flips, and a thin-margin operator pays 3% of gross even in a year it lost money.

For a profitable streaming or software business, a 3% final tax on gross works out closer to a ceiling than a penalty.

Why the collection doubled

KRA credits the increase to the scrapped threshold and the wider scope.

At 3% of turnover, KES 1.609 billion means foreign platforms declared roughly KES 53.6 billion of Kenyan revenue in FY2025/26.

The year before is harder to read, because the rate changed halfway through it. FY2024/25 ran July 2024 to June 2025, with DST at 1.5% until 26 December and SEPT at 3% after. Spread the turnover evenly across those months and KES 807 million implies about KES 35.9 billion.

Declared turnover therefore rose by about half, while the collection doubled. Roughly half the jump came from the higher rate and roughly half from new money in the net. KRA mentions the threshold and the scope. It does not mention that the rate itself had doubled a few months earlier.

This is our own calculation from KRA’s published totals and it leans on an assumption about how the year splits. Treat it as the shape of the change rather than a precise figure.

The figure KRA left out

KRA has not published how many non-resident companies are registered for SEPT, or how many filed. That is the number that would show whether compliance is broad or thin.

Without it, KES 53.6 billion cannot be read as a measure of Kenyan spending on foreign digital services. After the exemptions above, it covers only the residual group of suppliers with no Kenyan office that fall outside withholding tax and actually declared. Setting it against household spending on streaming and cloud would put two unlike things side by side.

Collecting from companies with nothing here

The draft regulations get around the obvious problem of taxing a company with no assets in Kenya. Grant Thornton notes they let KRA collect directly from Kenyan customers and agents of the non-resident, which makes local parties liable for seeing the tax paid. KRA can also serve an agency notice on a bank to deduct and remit on the foreign company’s behalf.

KRA has been building the same kind of visibility at home. It reports 750,915 taxpayers onboarded onto eTIMS, its electronic invoicing system, by 30 June 2026. On gambling it counts 143 betting and gaming firms wired into its systems, alongside betting excise of KES 16.527 billion. The gambling regulator separately wants real-time access to betting transactions. We have written before about how KRA pushed eTIMS into everyday transactions.

Leaning on those systems has a cost. Business Daily reported that a 20-hour maintenance window starting on Wednesday 22 July ran into the weekend. Businesses could not issue invoices, and by Friday afternoon KRA was still saying it was working to restore service.

What to watch

The regulations are not law yet. KRA published the draft on 22 September 2025 and closed comments on 7 October 2025. Professional commentary in April 2026 still described the rules as awaiting gazettement. Until that happens the collection machinery above sits in a document with no legal force, and SEPT runs on the bare statute.

The treaty position is the other open question. Kenya’s double taxation agreements were written around physical presence and do not clearly deal with a tax of this kind. That gives foreign platforms room to argue they are being taxed twice on the same income. Business Daily reported in March that the Treasury is pushing digital services into its treaty talks, with agreements under discussion or awaiting ratification with more than 20 countries.

None of this changes what you pay. Your subscription price still carries 16% VAT, as it did last year. The platform behind it now owes Kenya 3% of what it earns from you instead of 1.5%. If it has an office here, it owes ordinary corporate tax instead.

Related: KRA’s six-month tax amnesty runs to 31 December 2026, and Adan Mohamed took over as Commissioner General in May.