Treasury Cabinet Secretary John Mbadi has announced that the government will reduce the Digital Asset Tax from the current 3.0 per cent to 1.5 per cent under the Finance Bill 2025.
Mbadi explained that the decision aligns with the recent reduction of the Turnover Tax, which primarily targets small businesses. He noted the need for uniformity in the tax regime to ease the burden on digital entrepreneurs, many of whom operate small-scale businesses.
"Digital tax will be reduced from 3 per cent to 1.5 per cent in the new budget. The argument from players in the digital space has been that they are largely small business people, hence the need for uniformity. Also, to enhance compliance, which in turn enhances revenue collection," Mbadi stated.
"For uniformity, we have reduced that to 1.5 per cent, so both the digital and the turnover tax will be at the same figures."
The CS, speaking during a town hall session at Daystar University in Nairobi, revealed that the move is part of the government’s broader plan to enhance tax compliance among Kenyans.
According to Mbadi, Treasury research indicated that lower tax rates promote compliance, which informed the government’s decision to pursue tax reductions.
"We believe that with the digital tax coming down, we are likely to collect even more taxes," he added.
A Digital Service Tax (DST) is a tax imposed on revenues earned by companies that provide digital services or operate online platforms within a country, even if they don’t have a physical presence there.
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.
In Kenya, the Digital Service Tax (DST)—also known as the Digital Economic Presence Tax—applies to revenues earned from digital platforms and services operating within the country.
This includes online marketplaces like Jumia, streaming services such as Netflix, digital advertising platforms like Google Ads and Facebook, subscription-based services including Spotify, and even content creators or influencers earning income through online activity.
The tax was introduced to ensure that both local and foreign digital businesses contribute to government revenue, especially as economic activity increasingly moves to digital spaces.
The 2025/26 Financial Year has an estimated budget of Ksh4.3 trillion, with a revenue target of Ksh3.386 trillion.
