The Kenya Revenue Authority (KRA) has stepped up efforts to secure rights to tax cross-border digital income in Double Tax Agreements (DTAs) arrangements, signalling a shift in how the country plans to capture revenue from the fast-growing online economy.
The tax agency said Kenya is keen on including clauses in DTA treaties that allow taxation of income from digital platforms, software services, online advertising, and other services sold locally but paid for offshore.
Tech firms such as Google (owner of YouTube), Meta Platforms (such as Facebook), Amazon, Netflix, and X (formerly Twitter) generate significant earnings in Kenya’s digital marketplace, but reportedly pay a fraction of their fair share of taxes.
“DTAs allocate taxing rights between countries and prevent double taxation and double non-taxation. Some of the key provisions/ articles that Kenya insists on [when negotiating for DTAs] include an article on taxation of automated digital services,” KRA Commissioner for Large and Medium Taxpayers Weldon Ng’eno via email, underscoring a growing push by the authority to close gaps that have historically enabled profit shifting in the digital economy.
The move comes at a time when governments across the world are grappling with how to tax multinational technology firms that generate income in markets where they have little or no physical presence.
The emphasis on digital taxes is a departure from older DTA treaty frameworks that largely relied on physical presence, or technically known as permanent establishment, to determine taxing rights. That framework is increasingly being rendered irrelevant in the era of cloud computing and platform-based business models.
Under the older DTA arrangements, some digital firms can book profits in low-tax jurisdictions like the British Virgin Islands and the Isle of Man when their users and revenues are largely generated in Kenya.
This has fuelled concerns over revenue losses in recent years, particularly as digital services, which include streaming, e-commerce, and cloud computing, become embedded in the everyday economic activity of households and businesses.
Non-resident companies providing digital services to users in Kenya without a physical presence, from January 2025, are subject to a Significant Economic Presence (SEP) tax at a rate of three percent of gross turnover. This replaced the digital tax service at the rate of 1.5 percent on the gross value of transactions.
The focus on digital taxation also comes as the National Treasury is looking to expand Kenya’s tax treaty network, with DTAs under consideration with at least 15 countries, largely in Africa.
These include Algeria, Cameroon, Democratic Republic of Congo, Ethiopia, Ghana, Ivory Coast, Jordan, Macedonia, Malawi, Mozambique, Russia, Senegal, South Sudan, Sudan, and Zimbabwe.
Negotiations are also ongoing with Belgium, Egypt, Japan, Malaysia, and Spain, while concluded agreements awaiting signing and ratification include those with Singapore, Türkiye, Botswana, Nigeria, Portugal, Saudi Arabia, and Thailand.
Treaties with China, the Netherlands, Mauritius, Kuwait, Italy, and the East African Community bloc have been signed but haven’t entered into force yet.
Kenya’s last round of enforced DTAs dates back to 2017, when it ratified agreements with Iran, Korea, and the United Arab Emirates, highlighting the long gaps that usually characterise treaty implementation despite ongoing negotiations.
“Negotiations are technical and involve balancing economic development objectives with revenue protection,” Mr Ng’eno said.
“There is always room for improvement, especially in stakeholder engagement and awareness, but the legal framework already embeds transparency safeguards.”
Kenya has DTAs in force with about 14 jurisdictions. They are the United Arab Emirates, Iran, Qatar, Canada, Denmark, France, Germany, Korea, Norway, Seychelles, South Africa, Sweden, the UK, and Zambia.
