Kenya’s Finance Bill 2025 is finally here, and the country’s digital economy will see some changes as a result of targeted tax reforms and incentives for local tech manufacturing. Taking effect in July, the government hopes these changes will increase revenue for the upcoming financial year.
New Digital Marketplace Regulations
The bill redefines “digital marketplace” as “an online platform that enables users to sell goods or provide services to other users.” This expansion means global e-commerce platforms and gig economy apps operating in Kenya, regardless of physical presence, will be affected.
Excise duty now applies to services “supplied over the internet, an electronic network, or through a digital marketplace,” taxing digital transactions involving Kenyan consumers regardless of provider location. This includes services like OpenAI’s ChatGPT, which recently announced the addition of 16% VAT on ChatGPT invoices for users in Kenya starting May 1.
Non-resident digital service suppliers are considered as doing business in Kenya if their services are consumed locally, which expands KRA’s enforcement reach to global tech companies.
Digital Compliance
The bill also strengthens the electronic tax invoice system under the Tax Procedures Act, requiring proper documentation for tech-based services.
Digital companies must provide country-by-country reports, which means increased transparency for multinationals operating through tech platforms, a move that aligns with global efforts against profit shifting (a tax avoidance technique used by multinational corporations to move their profits to low-tax or no-tax havens).
Local Manufacturing Incentives
On the positive side, the Finance Bill 2025 has added VAT exemption on locally assembled and manufactured mobile phones. This incentive may position Kenya as a potential hub for affordable smartphone production, reducing imports and potentially creating jobs.
Other VAT-exempt items include:
- Electric bicycles and buses
- Lithium-ion and solar batteries
- Bioethanol vapor stoves
These exemptions are geared towards supporting green technology adoption and electric mobility initiatives.
However, several VAT exemptions previously benefiting ICT infrastructure development have been eliminated or restructured. While some grace periods extend to June 2026, these changes may increase costs for digital startups and network providers.
You can read the whole bill here.
