The Finance Act 2019 (“The Act”) was assented by the President on 7th November 2019. We have analysed the Act, providing insights into the implications of the various changes.

Section 3 of the ITA is amended to include taxation of income accruing from a digital market place. A digital market place is defined as “a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means” The Act also introduces Section 3 (2A) which mandates the Cabinet Secretary to establish Regulations to assist in the implementation of the taxation of the digital economy.

This has been in a bid to align Kenya to Action 1 of BEPS (Base Erosion and Profit Shifting) Action Plan. This includes addressing the challenges of the digital economy and identification of applicable rules to enhance the existing international tax rules.

Examples of companies that are operating in this digital space include taxi hailing companies, 2. online malls and other companies that promote and sell their goods and services on social media platforms. It remains to be seen the practicality of this given the grey area that is profit attribution attributable to suppliers within the digital space who have no taxable presence in Kenya.

Key questions will be how the taxable presence will be established in Kenya given that the major players in this industry have no permanent establishments (PE) in Kenya and how profit will be taxed under Kenyan jurisdiction.