The Kenya Revenue Authority (KRA) has announced plans to impose taxes on income generated from digital applications downloaded within the country, marking a significant expansion of its tax collection efforts into the digital economy.
Under the Value Added Tax (VAT) Act 2013, app developers will face a 16% levy on platform downloads and related revenue. The tax authority will collaborate with the Communications Authority of Kenya (CA) to access transaction data from both local and foreign-based app providers operating in the region.
Deputy Commissioner for Corporate Policy Maurice Oray emphasized that app services qualify for VAT as they are not zero-rated or exempt. Residents must pay taxes through standard channels, while non-residents are required to appoint tax representatives under Section 16 of the Tax Procedures Act.
Companies generating over Sh5 million annually must register for VAT and pay corporate tax at 30% for local firms and 37.5% for foreign entities. Smaller operators with turnover below Sh5 million face a 15% presumptive tax or potential monthly turnover tax at 3% under the 2019 Finance Bill.
Individual income tax rates range from 10% on earnings up to Sh147,580 to 30% for income exceeding Sh564,709. Oray noted that self-assessment remains central, with penalties for non-compliance.
The KRA faces challenges in enforcing taxes against online businesses lacking physical presence in jurisdictions. The authority aims to meet a Sh6.1 trillion revenue target through 2021, with digital taxation seen as critical to achieving this goal.
Similar measures have been adopted globally, including Uganda’s 2018 social media tax and France’s 2019 digital levy on tech giants like Google and Amazon.
