Kenya has issued new regulations for its Significant Economic Presence tax on non-residents who earn income from digital services provided to users in Kenya. They are not yet in force, but once approved they will replace the existing Digital Service Tax regulations.
The Cabinet Secretary for the National Treasury has issued the Income Tax (Significant Economic Presence Tax) Regulations 2026. They set out how the Significant Economic Presence (SEP) tax is to work in practice for non-resident providers of digital and online services.
The Regulations are not yet in force. They were issued through Legal Notice No. 188, dated 12 August 2026 and made available on 18 September 2026. They are still awaiting publication in the Kenya Gazette, and will be tabled before the National Assembly, which may approve or annul them. An earlier draft was published in September 2025.
When they do take effect, the Regulations will revoke and replace the Income Tax (Digital Service Tax) Regulations.
Who Is Affected
The Regulations apply to non-resident persons without a permanent establishment in Kenya who derive income from providing services to users in Kenya over the internet, an electronic network or a digital marketplace.
The SEP tax is a final tax. It does not apply to:
- income that is already chargeable under specified sections of the Income Tax Act;
- the income of a non-resident person who provides services through a permanent establishment in Kenya; or
- income from services provided to an airline in which the Government holds at least 45% of the shares.
Which Services Are in Scope
The list of services is broad. It includes:
- downloadable digital content, such as mobile applications, e-books and films;
- subscription-based media, including news magazines and journals;
- streaming, listening to, viewing or playing online content, including television shows, films, music, games, podcasts and webcasts;
- software, including drivers, website filters and firewalls;
- electronic data management, including cloud computing, website hosting, online data warehousing and file sharing;
- search engines and automated helpdesk services;
- artificial intelligence services;
- ticketing for events, theatres, cinemas, restaurants and similar;
- online education, including distance learning, e-learning, webinars, online courses and training;
- platforms that link suppliers to customers, including ride hailing, online travel, and rental and accommodation marketplaces;
- the monetisation of data collected about users from their online activity;
- facilitating online payments, including money transfer services;
- facilitating the exchange or transfer of digital assets; and
- any other service offered over the internet, an electronic network or a digital marketplace that is not exempt.
That final item means the list is illustrative rather than exhaustive. Broadly speaking, if a service is delivered online to a user in Kenya and is not exempt, it should be assumed to be in scope.
When Is a User “in Kenya”?
A user is treated as located in Kenya if any one of the following applies:
- the service is accessed through a device from a terminal located in Kenya;
- payment is made using a debit facility, credit facility or electronic payment system in Kenya;
- the service is acquired using an internet protocol (IP) address registered in Kenya;
- the service is acquired through a network transmission or electronic communication originating from Kenya;
- the service is acquired through Kenya’s international telephone country code; or
- the user has a business, residential or billing address in Kenya.
It is worth bearing in mind that only one of these tests needs to be met. A Kenyan billing address, or a payment through a Kenyan card, is enough on its own.
How the Tax Is Calculated
SEP tax is charged at 30% of a deemed taxable profit, and the taxable profit is deemed to be 10% of the gross turnover from taxable services. In effect, the tax is 3% of gross turnover.
For example, a non-resident provider with gross turnover from users in Kenya of KES 10 000 000 would have a deemed taxable profit of KES 1 000 000, and SEP tax of KES 300 000.
Gross turnover means income derived from or accrued in Kenya through a business carried on over the internet, an electronic network or a digital marketplace. It includes payments received for services, and the commissions or fees paid to a digital marketplace provider for using the marketplace. It excludes VAT.
Registration, Returns and Records
- Non-residents supplying services subject to SEP tax must register under the simplified tax registration framework.
- A non-resident who elects not to register under that framework must appoint a tax representative under the Tax Procedures Act.
- Anyone already registered under the Digital Service Tax regulations will be treated as registered under the new Regulations.
- A return must be submitted, and the tax paid, by the 20th day of the month following the month in which the income was derived or accrued.
- Returns may be amended. Overpaid tax can be carried as a credit against future liabilities, or refunded when the business stops.
- A non-resident who stops providing the services must apply to the Commissioner to deregister, under section 10 of the Tax Procedures Act.
- Records must be kept.
Our View
Much of this is welcome. Confirming that SEP tax is a final tax, and publishing a list of the services in scope, should give non-resident providers more certainty than they have had. Treating those already registered under the Digital Service Tax regulations as registered under the new rules is a sensible, practical step, and avoids an unnecessary second registration.
Less welcome is the breadth of the tests for where a user is located. Any one test is enough, and some of them, such as a Kenyan IP address or billing address, may not be easy for a provider to monitor in practice. Taken together with the catch-all at the end of the list of services, the net is cast very wide.
As the Regulations still have to go before the National Assembly, they may yet change. It will be interesting to see whether they are approved as drafted.
The Commercial Implications
Non-Resident Digital Service Providers
Any non-resident providing online services to customers in Kenya, without a permanent establishment there, should check its services against the list, and whether its customers meet any of the location tests. Systems will need to capture Kenyan turnover monthly, to meet the 20th-of-the-month deadline.
Those Already Registered for Digital Service Tax
Registration carries over automatically, but the scope and the computation are set out afresh, so it would be prudent to review both against the new Regulations rather than assume nothing has changed.
Platforms and Marketplaces
Gross turnover includes commissions and fees paid to a digital marketplace provider for using the marketplace. Platforms should check how this applies to their fee income from Kenyan users.
Looking Ahead
The Regulations are not yet law, but they give a clear indication of how Kenya intends to tax non-resident digital businesses. It would be sensible for affected businesses to prepare now, rather than wait for the National Assembly.
If you would like to discuss whether Kenya’s Significant Economic Presence tax applies to your business, and how to comply, our team would be glad to help. Get in touch.
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