Kenya: Income Tax (Digital Service Tax) Regulations entered into force

On 2 January 2021, the Income Tax (Digital Service Tax) Regulations, 2020 entered into force. The regulations outline the framework for digital service tax in Kenya, they define terms such as "digital marketplace," "digital service," and "digital service provider," and specify the types of digital services subject to the tax, including downloadable content, streaming services, data monetisation, and digital marketplace provision. Exceptions include online financial services provided by authorised institutions and services offered by government entities. The tax applies to income derived from digital services provided to users in Kenya, with specific criteria for determining user location. The tax is imposed on the gross transaction value, excluding Value Added Tax (VAT), and both resident and non-resident providers are required to register and comply with accounting and payment procedures. Non-resident providers without a permanent establishment in Kenya can either register under a simplified framework or appoint a tax representative. Failure to comply with the regulations results in penalties as prescribed by the Tax Procedures Act.