The Finance Act 2019 introduced VAT at the rate of fourteen percent of the taxable value of the taxable supply. Subsequently, the Cabinet Secretary for National Treasury and Planning has proposed the Draft Value Added Tax (Digital Marketplace Supply) Regulations, 2020 (“Draft Regulations”). The Draft Regulations are intended to provide for the mechanisms for implementing VAT on supplies made through a digital marketplace (which is defined as any supply of a service made over a platform that enables the direct interaction between buyers and sellers of services through electronic means). 

While the Draft Regulations are yet to be passed, we note that Kenya Revenue Authority (“KRA”), through a press release dated 23rd April 2020, directed business owners trading on digital platforms to charge VAT on their transactions and remit the taxes to KRA. The Commissioner for Domestic Taxes further stated that all non-compliant traders will be penalized for failure to charge VAT as required by law.

Overview of the Draft Regulations

Scope of Taxable Supplies

The digital supplies that are to be subject to VAT include among others, electronic services, downloadable digital content such as mobile applications, e-books and movies, Subscription-based media such as news, magazines, podcasts, TV shows and music streaming, online gaming, Software programs such as downloading software, drivers, website fillers and firewalls, Electronic data management such as website hosting, file sharing, cloud storage, Supply of music, films and games, Supply of search-engine and automated helpdesk services, Supply of digital content for listening, viewing or playing on any audio, visual or digital media, Supply of services on online marketplaces that links the supplier to the recipient such as Uber, Jumia and tickets purchased through the internet for live events. 

Registration of Suppliers of Digital Services

Suppliers of digital services are required to register for VAT in Kenya if the supplier is from a foreign country but supplies services to a customer in Kenya. The registration requirement also applies to a supplier whose place of business is not in Kenya but the recipient of the supply in Kenya, the payment for the supply emanated from a bank registered in Kenya, or the recipient has a business, residential or postal address in Kenya. 

Simplified VAT Registration Framework

The Draft Regulations provide for an online simplified VAT Registration framework to be used by digital marketplace suppliers from foreign countries (“foreign suppliers”). Registration is mandatory and should be done within thirty days from the publication of the Regulations. Any such supplier who experiences difficulties with the system is required to appoint a tax representative to account for the VAT on their supplies. In case a foreign supplier makes an over declaration or an under declaration through this system, amendments to the return can be made. If it is an over declaration, the amount overpaid will be retained as a credit to be offset against VAT payable in subsequent tax periods.

Time of Supply for purposes of Payment of Tax

The Draft Regulation specify the time of supply as being the earlier of the date of payment, in whole or in part or the date on which the invoice or receipt for the supply is issued. The supplier is required to submit a return and remit the tax due on or before the 20th day of the month succeeding that in which the tax became due

Tax Liability

The liability of remitting the VAT lies on the supplier including foreign suppliers. However, if the latter has a tax representative, the tax representative will be liable. A supplier may also work with an intermediary who facilitates the supply of services through the digital marketplace and who is responsible for issuing invoices and collecting payments for the supply on whom the liability of remitting tax and returns will lie. 

Tax Invoice

Suppliers are required to generate an ETR Receipt. However, foreign suppliers are exempt from this requirement provided they issue an invoice or receipt showing the value of the supply and tax deducted.

Further, a foreign supplier is required to submit a record of all the supplies made in Kenya indicating the value of the supplies and VAT deducted, for every tax period.

Claim for Input Tax

Deduction of input tax will not be allowed under the simplified VAT registration framework. 

Offences and Penalties

A supplier who fails to comply with these regulations will be restricted from accessing the digital marketplace until such obligations are fulfilled in addition to the penalties prescribed under the Act.


While the obligation to charge VAT for supplies made through a digital marketplace has existed since 2019, the appropriate mechanisms are yet to be put in place to facilitate the charging and collection of the tax. The Draft Regulations are therefore geared towards providing the mechanisms for implementing said taxation particularly for foreign suppliers. It is likely that foreign suppliers will be discouraged from providing digital services to the Kenyan market because of the restrictive mechanisms intended to be imposed on them, for example, their inability to claim input tax or get VAT refunds. However, the Draft Regulations are necessary to enable the government facilitate the collection of VAT from business owners trading through a digital marketplace.  

Ivyn Makena and Pauline Njau


This article is intended for general knowledge only. For substantive legal advice on this, please contact us through This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it. 

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