In an effort to boost the digital economy, the government has proposed a barrage of tax relief measures for the industry in the Finance Bill 2025, passed by the cabinet on Wednesday, April 29.
Among the taxes to be scrapped in the sector is the 1.5 per cent Digital Service Tax (DST)—this is the type of tax imposed on income accruing from a business carried out over the internet or an electronic network, including through a digital marketplace.
The tax, which is exclusive of Value Added Tax (VAT), is charged on the gross transactional value and only applies to non-resident digital providers without a permanent establishment in Kenya.
A wide range of digital services falls under this category, including streaming services like Netflix, downloadable digital content, digital marketplaces like Facebook Marketplace, and subscription-based media.
With most Kenyans moving online to purchase their goods and access subscription services for their entertainment, this tax relief has the potential to reduce the amount they pay for these essentials and could ultimately lower the cost of living.
Other Kenyans who are set to benefit from tax reliefs in the digital economy are cryptocurrency investors, colloquially known as 'crypto bros', after the government proposed halving the crypto tax rate from three per cent to 1.5 per cent.
This move is part of the government's plan to attract financial technology (fintech) to the country.
A new Significant Economic Presence (SEP) has also been proposed to provide a framework for taxing multinational platforms.
These digital economy tax reliefs are in line with the government's plan to prioritise sealing loopholes in existing tax measures instead of introducing new ones to lower the cost of living.
"In furtherance of these objectives, Cabinet also approved the Finance Bill, 2025, which focuses primarily on closing loopholes and enhancing efficiency, including addressing loopholes related to tax expenditures that have historically been exploited to siphon funds from public coffers, such as through inflated tax refund claims," part of the cabinet dispatch read.
The 2025/26 Financial Year estimated budget of Ksh4.3 trillion is also set to undergo substantial revisions before being tabled in Parliament.
This is expected to introduce austerity measures designed to strengthen fiscal discipline, reduce public debt vulnerabilities, and create the fiscal space necessary to deliver essential public goods and services.
