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The Finance Bill 2025 introduces significant updates to the country’s tax framework, particularly addressing the rise of digital commerce.
Among the most notable changes is the clear recognition and regulation of digital marketplaces, a move designed to keep pace with evolving business models and ensure fair tax collection in the digital age.
Defining Digital Marketplaces
The Finance Bill 2025 explicitly defines a digital marketplace as an online platform that enables users to buy and sell goods or services.
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This broad definition covers various types of platforms, from e-commerce sites and ride-hailing apps to service booking platforms.
The inclusion of this term in the tax legislation signals the government’s intention to capture tax revenue from digital transactions that previously might have fallen outside traditional regulatory scopes.
Expanding the Scope of Excise Duty
One key area affected by the changes is the Excise Duty Act. The Bill amends this law to clarify that goods and services supplied over the internet, an electronic network, or through a digital marketplace are subject to 20% excise duty.
This adjustment means that digital transactions are now treated on par with physical transactions when it comes to taxation.
Before this amendment, excise duty mainly focused on physical goods and direct services.
The update ensures that the growing volume of online sales does not escape taxation simply because of the delivery channel.
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If the Finance Bill 2025 is passed, KRA will require platforms that facilitate this exchange to remit excise duty for the transactions.
Take, for example, you order something via an e-commerce platform or purchase a subscription. If payment is made via that platform, then the company will be charged excise duty.
However, if you run an online business and you use digital platforms to market yourself but don’t take payments through the online platform, then that transaction will not be charged excise duty.
You will, however, have to pay your normal income tax and other obligations.
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Tax Obligations for Non-Resident Suppliers
Another important provision concerns foreign suppliers.
The Finance Bill 2025 stipulates that if a supplier’s business is located outside Kenya, the supply of services is considered made in Kenya if those services are consumed by Kenyan residents through digital means.
This provision is particularly significant given the global nature of digital services and the increasing reliance on international platforms.
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By defining the place of supply in this way, Kenya can require non-resident businesses that provide digital services to Kenyans to register, report, and remit excise duty accordingly.
This move cuts across all businesses as long as they are generating income from Kenya and Kenyans.
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Implications for Businesses and Consumers
For Kenyan businesses operating on or through digital marketplaces, the changes mean stricter compliance requirements.
They will have to understand their tax responsibilities under the new rules and ensure timely registration, reporting, and payment of excise duty.
Foreign businesses providing digital services to Kenyan customers are now explicitly within Kenya’s tax jurisdiction.
They may need to engage local tax agents or establish a local presence to comply with these regulations.
If the bill is passed, consumers might notice slight price adjustments as businesses factor in these taxes, but the overall effect should support a more level playing field between digital and traditional businesses.
Some of the businesses that will be affected include:
Streaming platforms like Netflix and YouTube
Ride-hailing services such as Uber and Bolt
Online marketplaces like Jumia and Airbnb
Digital advertising services
Cloud computing and software-as-a-service (SaaS) platforms
Online gaming and betting services