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By Phanice Ongera, Associate at Grant Thornton

The Finance Act, 2025 amended Section 10 of the Income Tax Act by introducing subsection 10(1)(m), which expands the scope of payments covered under this section. Specifically, it includes payments made by any person whether resident or non-resident to another person through a digital marketplace, and deems such income to be accrued in or derived from Kenya.

The wording of this section reads: 

“For the purposes of this Act, where a resident person or a person having a permanent establishment in Kenya makes a payment to any other person in respect of making or facilitating payment over a digital market place the amount thereof shall be deemed to be income which accrued in or was derived from Kenya”

This amendment broadens the definition of income sourced in Kenya by including payments made for facilitating transactions on digital marketplaces, regardless of whether the parties involved are physically located within or outside Kenya. Initially, this was not explicitly included in this section and now is clearly covered.

Going forward, effective 1st July 2025, all non-resident service providers will be subject to tax in Kenya if they earn income from Kenyan users, regardless of their physical location.

Importantly, this provision complements the withholding tax introduced by the Tax Laws (Amendment) Act, 2024, which took effect on 27th December 2024.