“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five per cent’ appearing in paragraph 12 (digital service tax rate) and substituting therefor the expression ‘three per cent’,” Treasury Cabinet secretary Ukur Yatani wrote in the Finance Bill 2022. Under the current 1.5 percent tax, the KRA targeted to increase Sh13.9 billion in three years, ending in June 2024, with foreign firms in Kenya’s digital marketplace expected to contribute Sh926 billion in gross revenue. Digital service tax (DST) collections are expected to be Sh3.4 billion this fiscal year, Sh5.0 billion the following fiscal year, and Sh5.5 billion in fiscal year 2024. The tax applies to foreign companies and is levied on the sale of e-books, movies, music, games, and other digital content. Kenya, along with Nigeria, Pakistan, and Sri Lanka, abstained from voting in the Paris-based Organisation for Economic Cooperation and Development on a 15 percent global minimum corporate tax backed by the United States (OECD). Kenya’s reluctance to accept the OECD deal stems from stipulations in the agreement that oblige it to abandon the digital services tax, which it first implemented in January 2021. The KRA was originally intended to target a percentage of revenue generated by resident and non-resident businesses who sell products over the Internet, but it was altered in the Finance Act 2021 to apply to non-resident firms beginning July 1, 2021.
