The Kenya Revenue Authority (KRA) has unveiled plans to tax income from mobile application downloads, targeting online businesses through data collaboration with the Communications Authority (CA). The proposal, outlined in a 2019 report, would require developers with annual sales exceeding KSh 5 million to register for Value Added Tax (VAT) obligations, facing a 16% levy alongside 30% corporate tax for local entities and 37.5% for foreign operators.
Smaller developers with sales below KSh 5 million would pay a 15% presumptive tax, contingent on county-issued business permits. KRA’s deputy commissioner for corporate policy, Maurice Oray, emphasized that online platforms fall under the VAT Act 2013 and Income Tax Act, stating, "VAT applies on those apps because you are providing a service which is not zero-rated or exempted." Non-resident developers must appoint tax representatives under Section 16 of the Tax Procedures Act.
The policy hinges on ratifying the "Multilateral Convention on Mutual Administrative Assistance in Tax Matters," which would enable KRA to access cross-border tax data. The agency cited challenges in taxing digital businesses, referencing Uganda’s 2018 social media tax controversy, which led to declining internet subscriptions. Meanwhile, a 2022 political development highlighted concerns over regulatory impacts on digital economies.
Individual income tax rates range from 10% on earnings up to KSh 147,580 annually, rising to 30% for incomes exceeding KSh 564,709. While the framework aligns with broader tax modernization efforts, implementation remains pending legislative approval.
