SHIFT FROM DST TO SEP

 


Significant Economic Presence Tax in Kenya: A New Era for Digital Businesses.

This newsletter provides an overview of the recently enacted Significant Economic Presence (SEP) Tax in Kenya, which has replaced the previous Digital Service Tax (DST).

What is SEP Tax?

SEP Tax is a tax levied on non-resident businesses that derive income from Kenya through digital platforms, even if they don't have a physical presence in the country. It aims to ensure that digital businesses contribute to the Kenyan economy. SEP Tax will replace the Digital Service Tax (DST), which was introduced in the Finance Act, 2020, and became effective in January 2021. The previous DST targeted 1.5% of gross transaction value and applied to both Kenyan and foreign digital service providers.

Key Features of SEP Tax:

  • Tax Rate: 3% of gross turnover.
  • Scope: Applies to a wide range of digital services, including online marketplaces, streaming services, and more.
  • Exemptions: Certain businesses are exempt, such as those with annual revenue below KES 5 million.

Implications for Businesses:

  • Increased Tax Burden: The SEP Tax rate is higher than the previous DST rate, potentially impacting profitability for some businesses.
  • Compliance Requirements: Businesses need to understand the specific requirements of SEP Tax and ensure compliance to avoid penalties.
  • Potential for Growth: The SEP Tax framework may encourage investment in Kenya's digital economy and create new opportunities for businesses.

 SEP Tax will not apply to:

·          -Income from digital services through a permanent establishment in Kenya

·         -Income subject to Withholding Tax

·         -Digital services provided to a government-owned airline (45%+ shareholding)

·         -Non-resident persons with annual turnover below KES 5 million

·         -Income from message transmission via cable, radio, optical fiber, broadcasting, satellite, or similar communication methods.

Conclusion

The introduction of SEP Tax signifies a crucial evolution in Kenya's tax landscape. Businesses operating within the digital sphere must carefully evaluate the implications of this new tax legislation and proactively implement strategies to ensure compliance. RWK Africa remains dedicated to supporting our clients in navigating this evolving tax environment, minimizing tax liabilities, and optimizing their operations within the Kenyan market.

Book a Free consultancy with us here

Visit our website to learn more

Follow our pages Facebook , Twitter, Linked In , Instagram , TikTok

Contact Us:

Email: info@rwkafrica.com
Phone: +254 728897429
Website: www.rwkafrica.com 



Comments

Post a Comment

Popular posts from this blog

Clarification On Taxation Of Meals Provided By Employers

Image
Background:  The Kenya Revenue Authority (KRA) issued a Technical Circular (Ref: 1005/1) in March 2017, outlining guidelines for the taxation of employment income, particularly regarding benefits provided to employees. Among these benefits, the circular stated that meals provided to employees up to a value of Kshs. 48,000 per year per employee were not subject to tax, in accordance with Section 5(4)(f) of the Income Tax Act. Clarification:  Recently, there has been confusion regarding the interpretation and application of this provision. The KRA has clarified that if an employer provides meals exceeding the value of Kshs. 48,000 per annum per employee, the entire value of the meal becomes taxable income for the employee. Essentially, any amount spent on meals beyond the specified limit is now subject to taxation under the Income Tax Act. Implications for Employers: This clarification places the responsibility on employers to ensure compliance with tax regulations regarding emp...
Read more

Key Changes to NSSF Contributions

Image
  As of February 1, 2025, significant changes to the National Social Security Fund (NSSF) contributions will take effect, impacting salaried Kenyans and their take-home pay. Here’s a detailed overview of these changes and their implications for taxpayers.
Read more

Understanding Advance Tax: Essential Information for Vehicle Owners.

Image
  Welcome to the latest edition of the RWK & ASSOCIATES CPA(K) Newsletter. In this issue, we focus on Advance Tax , a critical requirement for all commercial and public service vehicle owners. Understanding how this tax operates and how to manage it effectively can save you time and avoid unnecessary complications. Advance Tax is a mandatory prepayment needed before a commercial or public service vehicle can be registered or licensed. The tax amount is determined by the vehicle's type and capacity. For example, vans, pick-ups, trucks, and similar vehicles incur a fee of Kshs. 2,500 per ton of load capacity or kshs 5000 whichever is higher. In contrast, saloons, station wagons, mini-buses, buses, and coaches are charged Kshs. 100 per passenger capacity per month or kshs 5000 annual amount whichever is higher. It is important to note that Advance Tax is not a final tax. Taxpayers must report this payment in their annual income tax returns and settle any additional taxes that ...
Read more