Kenya has moved decisively to tax the digital economy, and the net is now wider than most non-resident businesses appreciate. Following amendments introduced by the Finance Act 2025, the Significant Economic Presence tax under Section 12E of the Income Tax Act applies to all income earned by non-residents from services delivered over the internet or any electronic network to customers in Kenya. There is no longer a minimum turnover threshold that could exempt smaller providers.
How Kenya Got Here
Kenya introduced a Digital Service Tax in 2021, applying a flat rate to gross revenues from digital marketplace transactions. The Tax Laws (Amendment) Act 2024 replaced the DST with the SEP tax, shifting to a deemed-profit basis and broadening scope beyond marketplace operators. The Finance Act 2025 then made two further significant changes: removing the definitional ambiguity about what counts as an in-scope activity, and abolishing the KES 5 million annual turnover exemption that had previously shielded smaller non-residents from the tax.
How the Tax Is Calculated
Under Section 12E(4) of the Income Tax Act, the taxable profit for SEP tax purposes is deemed to be 10% of the non-resident’s gross turnover attributable to Kenya. The applicable corporate tax rate is then applied to that deemed profit. This is not a net income calculation — expenses are not deducted. The 10% deemed profit simplifies compliance but means the effective tax cost is calculated on a gross basis.
SEP tax is calculated on a deemed taxable profit of 10% of gross turnover attributable to Kenya — not on actual net income. Returns are due by the 20th of the month following the month in which the service was provided.
Who Is Now in Scope?
If a non-resident business earns income from services delivered via the internet or any electronic network to persons in Kenya, the SEP tax is likely to apply. This covers businesses that may not think of themselves as digital:
- Software-as-a-service providers with Kenyan subscribers
- Non-resident consultants and advisory firms billing Kenyan clients for remotely delivered work
- Streaming, media, and content platforms with Kenyan users
- Fintech and payment platforms serving Kenyan merchants or consumers
- Cloud infrastructure and IT service providers
- Online marketplaces connecting buyers and sellers in Kenya
What Compliance Looks Like
Non-resident businesses in scope are required to register with KRA and file SEP tax returns by the 20th of the month following the month in which the service was provided. Failure to register or account for SEP tax carries penalties under the Tax Procedures Act.
For groups that have structured their African operations on the assumption that digital services are not taxable in-country, an immediate scope review is warranted. That assumption no longer holds in Kenya.
Practical Steps
- Conduct a scope assessment: identify all income streams from Kenyan customers delivered electronically and quantify gross turnover attributable to Kenya.
- Model the SEP tax cost: apply the 10% deemed profit to your Kenya gross turnover and calculate the resulting tax at the applicable corporate rate.
- Register with KRA if not already done and establish a monthly filing process.
- Review intercompany arrangements: where a non-resident group entity earns SEP income, ensure transfer pricing documentation covers the allocation of profits to Kenya.
Intelpoint Consulting advises non-resident businesses on SEP tax registration, compliance, and structuring. If you are unsure whether your business is in scope or how to calculate your liability, contact us for an assessment.
Contact Intelpoint Consulting: www.intelpointconsulting.com and at info@intelpointconsulting.com