Guide — Digital Services
VAT on Digital Services in Kenya 2026
If you sell software, streaming, online courses, or any digital service to Kenyan customers — or if you are a Kenyan business buying from foreign digital platforms — VAT applies. The rules differ for resident and non-resident suppliers. This guide covers everything you need to know.
What Counts as a Digital Service?
KRA defines digital services broadly as services delivered over the internet or an electronic network that are automated and require minimal human intervention. Under the VAT (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023, these include:
* Internet radio and TV broadcasting added by the Finance Act 2025, effective July 2025.
Resident vs Non-Resident Rules
Resident (Kenyan Business)
- Register when turnover exceeds KES 5M
- Charge 16% VAT to all Kenyan customers
- Zero-rate exports of digital services
- Full eTIMS compliance required
- Monthly VAT returns by the 20th
- Can claim input VAT on business costs
Non-Resident (Foreign Business)
- Register from the first sale — no threshold
- Charge 16% VAT on B2B and B2C sales
- Simplified registration regime
- Exempt from eTIMS invoicing
- Monthly VAT returns (simplified)
- May also be liable for DST at 1.5%
VAT vs Digital Service Tax (DST)
Many digital businesses confuse VAT with the Digital Service Tax. They are different taxes with different purposes:
| Feature | VAT (16%) | DST (1.5%) |
|---|---|---|
| Type | Consumption tax | Income tax |
| Charged on | Value of supply | Gross transaction value |
| Paid by | Customer (collected by business) | Platform / service provider |
| Applies to residents | Yes | No (already paying income tax) |
| Applies to non-residents | Yes | Yes |
| Filing frequency | Monthly | Monthly |
| Deductible input VAT | Yes | No |
Compliance for Kenyan Digital Businesses
If you run a Kenyan business selling digital services, here is what compliance looks like:
- Register for VAT once your turnover exceeds KES 5 million, or voluntarily if you want to claim input VAT on your costs. See our VAT Registration Guide.
- Set up eTIMS for invoicing. Even though you sell digital services, you must issue eTIMS-compliant invoices to your VAT-registered customers. Use eTIMS Lite or API integration if you have a billing system. See our eTIMS Onboarding Guide.
- Charge VAT correctly on all sales to Kenyan customers. If your customer provides a KRA PIN, they are VAT-registered — issue an eTIMS invoice and charge 16% VAT. If they are a consumer without a PIN, charge 16% VAT and declare as B2C.
- Zero-rate exports of digital services to customers outside Kenya. This means you charge 0% VAT but can still claim input VAT on your costs.
- File monthly by the 20th and remit any VAT due.
Compliance for Non-Resident Digital Suppliers
If you are a foreign company selling digital services to Kenyan customers, here is the simplified compliance path:
1. Register for a KRA PIN as a non-resident
Go to itax.kra.go.ke and register as a non-resident individual or entity. You will receive a KRA PIN that starts with a specific prefix for non-residents.
2. Register for VAT under the simplified regime
Select 'Digital Marketplace Supply' as your VAT category. There is no KES 5 million threshold — you register from the first sale.
3. Charge 16% VAT on all sales
On your invoices to Kenyan customers, clearly show 16% VAT. For B2B customers, capture their KRA PIN. For B2C, no PIN is required.
4. File monthly VAT returns
File a simplified VAT return by the 20th of each month showing total sales and VAT collected. Remit the VAT through the iTax payment options.
5. Consider DST obligations
You may also be liable for Digital Service Tax at 1.5% on gross transaction value from Kenyan customers. This is filed separately.
Claiming Input VAT as a Digital Business
Kenyan digital businesses can claim input VAT on their business costs, provided they have valid eTIMS invoices. Common input VAT items for digital businesses include:
- Cloud hosting (AWS, Google Cloud, Azure) — with eTIMS invoice from a Kenyan reseller or the supplier's VAT-registered entity
- Software subscriptions (tools, platforms, APIs) used for business
- Laptops, computers, and office equipment
- Office rent (if the landlord is VAT-registered and issues eTIMS invoices)
- Professional services (legal, accounting, consulting) from VAT-registered providers
- Internet and telecommunications services
- Marketing and advertising services from VAT-registered agencies
For a full guide on input VAT conditions and prohibited claims, see our Input VAT Deduction Guide.
Frequently Asked Questions
- Are digital services subject to VAT in Kenya?
- Yes. Digital services supplied in Kenya are subject to VAT at the standard rate of 16%. This includes software as a service (SaaS), streaming, e-learning, online advertising, downloadable content, and marketplace facilitation services. The VAT (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023 govern how VAT applies to these services.
- What is the VAT registration threshold for digital services?
- It depends on whether you are a resident or non-resident supplier. Resident suppliers (Kenyan businesses) must register for VAT when annual taxable turnover exceeds KES 5 million. Non-resident suppliers (foreign businesses) must register regardless of turnover — there is no threshold. The first sale to a Kenyan customer triggers the registration requirement.
- What is the difference between VAT and Digital Service Tax (DST)?
- VAT is a 16% consumption tax charged to the customer on the value of the supply. Digital Service Tax (DST) is a 1.5% income-based tax on gross transaction value, primarily targeting non-resident digital platforms. VAT is charged to customers and remitted to KRA. DST is paid by the platform itself. A business can be liable for both VAT and DST on the same transaction, but DST does not apply to Kenyan resident businesses already paying income tax.
- Do non-resident digital suppliers need to use eTIMS?
- Non-resident suppliers of digital services are exempt from the eTIMS invoicing requirements under the VAT (Electronic, Internet and Digital Marketplace Supply) Regulations. However, they must register for VAT under the simplified regime, charge 16% VAT on B2C and B2B transactions, and file monthly returns. Kenyan customers of non-resident suppliers can claim input VAT if the supplier has declared their KRA PIN in the return.
- What digital services are taxable in Kenya?
- Taxable digital services include: SaaS (software as a service), streaming services (video, music, podcasts), downloadable software and apps, e-books and digital publications, online courses and e-learning, online advertising services, marketplace facilitation, cloud computing services, domain name registration, subscription-based content platforms, and internet radio or television broadcasting (added by Finance Act 2025).
- How does a non-resident company register for VAT in Kenya?
- Non-resident digital suppliers register under the simplified VAT regime. The process involves: (1) applying for a KRA PIN through the iTax portal as a non-resident, (2) registering for VAT by selecting the digital marketplace supply category, (3) providing details of the digital services offered and the platform used, (4) appointing a tax representative in Kenya (recommended but not mandatory in all cases). Once registered, you must charge 16% VAT on all B2B and B2C transactions, file monthly VAT returns, and remit the VAT collected by the 20th of each month.