In a bid to boost the digital economy, the government has unveiled a series of tax relief measures in the Finance Bill 2025, which was passed by the Cabinet on Wednesday, April 29.
These measures are aimed at supporting the growth of the digital sector, which has been a key area of focus for the government as part of its broader economic strategy.
One of the most notable changes is the scrapping of the 1.5 percent Digital Service Tax (DST). This tax has been applied to income generated from online business activities or digital networks, such as digital marketplaces, streaming platforms, and subscription-based media.
It has mostly affected non-resident digital service providers without a physical presence in Kenya.
This tax is separate from the Value Added Tax (VAT) and is calculated based on the total transactional value of digital services.
The digital services affected by this tax include popular platforms like Netflix, downloadable digital content, and online marketplaces such as Facebook Marketplace.
As more Kenyans increasingly turn to online services for shopping and entertainment, this tax relief could reduce the cost of accessing these essential services, potentially making life more affordable for many.
Another group set to benefit from the tax cuts are cryptocurrency investors, often referred to as ‘crypto bros.’
The government has proposed lowering the crypto tax rate from three percent to 1.5 percent, making it more attractive for investors in the cryptocurrency space.
This move is part of the government’s efforts to position Kenya as a hub for financial technology (fintech) and to encourage more investment in this growing sector.
Additionally, a new framework known as the Significant Economic Presence (SEP) has been introduced to help tax multinational digital platforms that operate in Kenya.
This will ensure that large global companies contributing to the digital economy pay their fair share of taxes.
The government’s new tax relief measures are in line with its broader objectives of improving tax collection efficiency and addressing existing loopholes in the tax system.
The Finance Bill, 2025, focuses on closing these gaps and ensuring that funds are used effectively, especially in light of past concerns about misuse, such as fraudulent tax refund claims.
The proposed budget for the 2025/26 Financial Year, amounting to Ksh4.3 trillion, will also undergo significant revisions before being presented to Parliament.
These revisions are expected to include measures aimed at reducing public debt and ensuring that there is enough financial space to provide essential services to the public.
These steps reflect a commitment to improving fiscal discipline and creating a more sustainable economic environment.
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