The Finance Act 2020 made changes that’ll affect the tax liability of startups & small businesses operating in Kenya. Digital Service Tax is one such change. Online service providers will pay Digital Service Tax on income derived in Kenya from services offered through any digital market place.

What then is a digital market place in this context?

The Kenya Revenue Authority defines a digital market place as a platform that enables direct interaction between buyers and sellers (of goods and services) via electronic means.

The applicable rate is 1.5% of the gross transaction value. This tax is due at the time of transfer of the payment for the service to the service provider. This means that for every service sold online, a DST of 1.5% of the value of the service is payable to the Kenya Revenue Authority.

Lastly, you may treat this tax as an advance tax or a final tax based on the residence status of your startup or small business.

What does this mean for your business as a startup operating in Kenya?

Well, in case you need more information please click here to learn how to manage all your tax and legal obligations.