💡 Introduction: Kenya’s Evolving Digital Tax Landscape
In 2025, Kenya’s Digital Service Tax (DST) continues to shape how both local and global businesses engage with the country’s growing digital economy. Initially introduced under the Finance Act 2020 and refined through subsequent Finance Acts (2021–2025), DST ensures that digital income generated from Kenya is taxed fairly — even when earned by non-resident digital platforms such as Netflix, YouTube, or Fiverr.
This guide breaks down everything you need to know — from who should pay DST, the updated 2025 rates, and how to file on iTax, to the connection with eTIMS and auto-populated VAT returns.
🧾 1. What Is Digital Service Tax (DST)?
DST is a tax on income derived from digital services provided in Kenya through an electronic network or marketplace. It applies primarily to non-resident persons without a permanent establishment in Kenya who earn income from Kenyan users.
For resident companies, DST acts as a withholding tax credit against income tax due — ensuring no double taxation.
⚖️ 2. Legal Foundation
- Introduced under: Finance Act, 2020
- Current legal basis: Section 12E of the Income Tax Act (Cap. 470) as amended by the Finance Act, 2025
- Administered by: Kenya Revenue Authority (KRA)
- Applicable from: 1st January 2021 (updated rates effective January 2025)
The Finance Act 2025 aligns Kenya’s DST with OECD digital taxation models, clarifying the definition of “digital marketplace” and expanding the scope of taxable transactions.
💻 3. Who Should Pay DST in 2025?
✅ Applies To:
- Non-residents without a permanent establishment in Kenya who earn income from:
- Online streaming platforms (e.g., Netflix, Spotify)
- Online marketplaces (e.g., Amazon, Jumia Global)
- Gig platforms (e.g., Fiverr, Upwork)
- Digital advertising services (e.g., Google Ads, Meta)
- Online betting and gaming
- Software as a Service (SaaS) tools
- Kenyan-resident digital platforms hosting or facilitating foreign transactions (as tax agents).
🚫 Exemptions:
- Residents already paying corporate income tax or turnover tax
- Non-residents with a permanent establishment in Kenya
- Government institutions
💰 4. DST Rate in 2025
Under the Finance Act 2025, the DST rate remains 1.5% of the gross transaction value for non-resident entities.
For residents, the DST withheld can be credited against their annual income tax liability.
| Taxpayer Type | DST Rate | Notes |
|---|---|---|
| Non-resident (no PE) | 1.5% | Final tax on gross revenue |
| Resident | 1.5% (creditable) | Offset against income tax |
🔍 5. What Counts as a “Digital Service”?
KRA defines a digital service as any service delivered through a digital marketplace or electronic network. Examples include:
| Category | Examples |
|---|---|
| Streaming & Entertainment | Netflix, YouTube Premium, Spotify |
| Advertising | Google Ads, Facebook Ads |
| Online Freelancing | Fiverr, Upwork |
| SaaS Platforms | Zoom, Canva, Shopify |
| E-commerce | Amazon, Jumia Global |
| Digital Learning | Coursera, Udemy |
| App Stores | Google Play, Apple App Store |
💡 6. How to File and Pay DST in Kenya (2025)
Step-by-Step:
1️⃣ Log in to your KRA iTax account (or create one if new).
2️⃣ Go to “File Returns” → “Digital Service Tax (DST)”.
3️⃣ Select the relevant tax period.
4️⃣ Enter gross income derived from Kenyan users.
5️⃣ System auto-calculates 1.5% DST payable.
6️⃣ Generate Payment Slip (PRN) and pay via KRA-approved banks or mobile money.
🕒 Deadline: On or before the 20th day of the month following the month in which the transaction occurred.
🧾 7. How to Register for DST (Non-Residents)
1️⃣ Visit the KRA Digital Service Registration Portal.
2️⃣ Appoint a Kenyan tax representative or agent.
3️⃣ Provide business registration and domain details.
4️⃣ KRA assigns a non-resident PIN for DST filings.
5️⃣ Begin monthly declarations via iTax.
🌍 8. How DST Relates to VAT and Corporate Tax
| Tax Type | Applicability | Interaction |
|---|---|---|
| VAT (16%) | Charged on taxable digital supplies consumed in Kenya | Collected via VAT Auto-Populated Return (DST CSV)FAQS-FOR-THE-VAT-AUTOPOPULATED-… |
| Income Tax | Charged on resident company profits | DST acts as a credit for residents |
| DST | Charged on non-resident digital service income | Final tax if no permanent establishment |
Thus, VAT and DST are not interchangeable — both may apply to the same transaction but serve different tax purposes.
📘 9. Example Calculation
Example:
A non-resident earns KSh 1,000,000 from Kenyan subscribers via a streaming platform.
DST = 1.5% × 1,000,000 = KSh 15,000 payable monthly.
🚨 10. Penalties for Late Filing or Payment
Under the Tax Procedures Act (Cap. 469B):
- Late filing: KSh 20,000 or 5% of tax due (whichever is higher)
- Late payment: 5% of tax due + 1% interest per month
💬 11. Common DST Mistakes
| Mistake | Tip |
|---|---|
| Confusing DST with VAT | DST is on income, VAT is on consumption |
| Missing monthly filing deadlines | Use KRA calendar reminders |
| Ignoring Kenyan-source definition | Any income earned from Kenyan users is taxable |
| Not appointing a tax agent | Non-residents must appoint a local representative |
🧠 12. FAQs
Q1: Is DST deducted automatically by platforms?
A: Not yet — each platform must self-file until automated collection systems are introduced.
Q2: Can residents claim DST back?
A: Yes, it’s offset against their income tax payable.
Q3: Does DST apply to YouTubers or influencers?
A: If income is from AdSense or brand deals paid by non-resident companies, yes — but many are covered under Withholding Tax instead.
📊 13. Future Outlook
KRA’s long-term goal (as per the Finance Act 2025) is to integrate DST collection into eTIMS and auto-populated VAT systems, enabling real-time reporting of digital transactions for both residents and non-residents.
🏁 Conclusion
Kenya’s Digital Service Tax reflects a global move to ensure digital giants and online platforms pay fair taxes where they earn their income.
For digital entrepreneurs, influencers, and tech businesses, understanding DST is essential for staying compliant and avoiding costly penalties.
💬 Need help with DST registration or filing?
Contact Ushuru.com for expert compliance support tailored to your business.