Overview

Digital Service Tax (DST) is a tax imposed under section 12E of the Income Tax Act, Cap 470 on income accruing from a business carried out over the internet or an electronic network, including through a digital marketplace. According to Section 3(3)(ba) of the Income Tax Act, Cap 470, a digital marketplace is defined as an online or electronic platform that enables users to sell or provide services, goods, or other property to other users.

Key Issues

The introduction of DST in Kenya, effective January 2021, marked a significant step towards broadening the tax base and ensuring that digital economy players pay taxes. The widespread dissemination of inaccurate information about DST is hindering its effective implementation, impacting revenue collection for the Kenya Revenue Authority (KRA) and creating confusion among taxpayers. Amongst the misinformation is the interaction between withholding tax and DST.

This fact sheet aims to clarify misconceptions and highlight the importance of accurate information for both the KRA and taxpayers. By addressing DST misinformation, we can enhance tax compliance, boost revenue collection, and foster a transparent tax environment.

Key Facts & Figures

1. DST is charged at 1.5% of the gross transaction value. The gross transaction value is exclusive of VAT.
2. It applies to non-resident digital providers without a permanent establishment in Kenya.
3. Non-resident entities without a permanent establishment in Kenya pay DST as a final tax.
4. DST was also applicable to resident taxpayers for the period January to June 2021, after which residents were excluded from DST. The tax paid could be offset against corporate income tax at the end of the year.
5. The tax is due upon offering of a service – that is, on an accrual basis.
6. DST applies to a wide range of digital services, including streaming services, downloadable digital content, digital marketplaces, subscription-based media, and more.
7. KRA collected Kshs. 10,806,084,095 from the digital economy in FY 2023/2024.
8. There are currently more than 350 taxpayers registered under the DST obligation.

Due Date for Paying DST

DST is due on a monthly basis, on or before the 20th day of the following month in which the digital service was offered. DST is paid through a payment return by generating a Payment Registration Number (PRN), which is deemed as filed. The PRN enables payment of the tax at appointed commercial banks in Kenya.

Kenya’s Position on Global Minimum Corporate Tax

Kenya proposed the introduction of a global minimum tax in the now withdrawn Finance Bill 2024, with the aim of addressing tax challenges in the digital economy. The proposal intended to levy a domestic top-up tax on multinational enterprises operating in Kenya with an effective tax rate below 15%.

Procedures & Guidelines

Step-by-Step Process for DST Payment Return:

1. The taxpayer logs into iTax using their PIN and password.
2. Click on the Payment Registration icon on the landing page or on Payment Registration under the Payments drop-down menu.
3. Select the Tax Head as Income Tax, Tax Sub Head as Digital Service Tax (DST), Payment Type as Self-Assessment Tax, and the Tax Period (Year and Month).
4. Input the Monthly Turnover Value, select your Mode of Payment, and click on Submit.
5. Click on the Pay Now button for Mobile Money or Credit Card payment or click on Make Payment under the Payment Registration menu to access the Web Checkout form.
6. For non-resident taxpayers who successfully raise a Payment Slip in iTax for DST, payment via SWIFT is also available. The SWIFT details MUST include the Payment Registration slip Number and the Tax Head (Income Tax - DST).