Kenya’s Finance Bill 2025 has been laid and it’s a game changer for the digital economy and local tech manufacturing. Effective July 2025, these changes aim to increase tax revenue and position Kenya as a regional leader in green and digital innovation.
Key Highlights of the Finance Bill 2025
1. Defining the Digital Marketplace
The bill expands the definition of a “digital marketplace” to include any online platform that allows users to sell goods or services. This means global e-commerce platforms, gig economy apps and digital service providers will be subject to Kenyan tax laws even if they don’t have a physical presence in the country.
2. Excise Duty for Online Services
For the first time, excise duty will apply to services offered via the internet or digital marketplaces. This affects foreign digital services consumed by Kenyans—such as streaming platforms, online learning portals and AI tools like ChatGPT which has already announced it will start charging 16% VAT in Kenya from May 1.
Implication: Any digital service used by Kenyan consumers will now be subject to local taxation, regardless of where the provider is based.
3. Non-Resident Tech Firms to Comply with Kenyan Tax Rules
Under the bill, non-resident digital suppliers are deemed to be “doing business in Kenya” if their services are consumed locally. This gives the Kenya Revenue Authority (KRA) more teeth to enforce compliance and collect taxes from international tech giants.
Enhanced Tax Reporting & Compliance Requirements
The Finance Bill also tightens compliance rules under the Tax Procedures Act by:
Requiring electronic tax invoices for tech-based services
Mandating country-by-country reporting for multinational tech firms
These changes align Kenya with global efforts to curb base erosion and profit shifting (BEPS) by multinational corporations.
Incentives for Local Tech Manufacturing
While the bill tightens rules for digital services, it introduces tax incentives for local hardware manufacturers, including:
VAT exemption for locally assembled or manufactured mobile phones
Exemptions for electric bicycles and buses
VAT relief on lithium-ion and solar batteries
VAT exemption for bioethanol vapor stoves
Upside: Kenya could become a low-cost smartphone production hub and sustainable transport solutions.
Rollback of ICT Development Exemptions
Not all tech players will benefit. The bill proposes to eliminate or restructure VAT exemptions for ICT infrastructure projects. While there’s a grace period until June 2026, startups and telecom providers will face higher costs going forward.
Conclusion
Kenya’s Finance Bill 2025 is a game changer—balancing revenue and local innovation. The digital economy will be regulated more, but manufacturers and green tech investors will have more opportunities.