What is the Digital Services Tax (DST)?
Digital Services Tax (DST) was introduced in Kenya through the Finance Act 2020 and took effect on 1st January 2021. DST applies to income derived or accrued in Kenya from digital marketplace services, and it is charged at 1.5% of the gross transaction value.
A digital marketplace is defined as an electronic platform that enables direct interaction between buyers and sellers for goods or services.
Who Should Pay Digital Services Tax?
DST applies to both residents and non-residents who offer digital services or operate digital platforms accessed by users in Kenya. The tax obligation arises when a service is provided to a user located in Kenya, regardless of where the provider is based.
What Qualifies as a Digital Service?
The range of digital services subject to DST includes:
- Downloadable content: mobile apps, e-books, films
- Streaming services: TV shows, music, podcasts
- Data monetization: sale or licensing of user data
- Digital marketplaces: platforms enabling transactions
- Subscription-based media: digital magazines, journals
DST is not applicable to the sale of physical goods through online or social media platforms. Those sellers are required to declare income and pay tax under the self-assessment regime.
Examples to Clarify DST Applicability
- Maria sells clothes on Instagram
✅ No DST — She declares income under standard income tax provisions.
✅ However, Instagram pays DST at 1.5% of its gross value from Kenyan users. - Maria earns money as an influencer
✅ Yes, Maria is liable for DST because she earns income from promoting brands. - Maria owns a website for advertising
✅ Yes, DST applies to the fees or commissions she charges users for the service.
When and How is DST Paid?
- Due date: On or before the 20th day after the end of the month the digital service was offered.
- Resident digital service providers: Generate a payment slip via iTax (no separate return required).
- Non-resident providers: Must register via the iTax portal and file DST returns.
Is DST a Final Tax?
- For residents and companies with a permanent establishment in Kenya: DST is an advance tax, offset against annual income tax.
- For non-residents without a permanent establishment: DST is treated as a final tax.
Why DST Matters
DST ensures that both local and foreign digital service providers contribute fairly to Kenya’s tax system. It:
- Levels the playing field for Kenyan businesses
- Expands the tax base
- Increases government revenue
For more detailed guidelines, read the official KRA Digital Services Tax brochure.
