Kenya: Final regulations on application of significant economic presence (SEP) tax

Scope of the charge (reg 3(1) and "service" definition)

Tax applies to services provided "through a business carried out over the internet or an electronic network including through a digital marketplace." "Digital asset" and "digital marketplace" are defined.

The qualifier is removed, so the tax applies to "income… from the provision of services." Both definitions are dropped. "Service" is now "a digital service or other service" delivered or subscribed over the internet or an electronic network.

Scope is less tied to the "business carried out over" wording. It now rests on the "service" definition.

Taxable services (reg 4)

13 items. Data monetization is limited to activity "on a digital marketplace." Payments and digital assets are one item.

14 items. Data monetization is "in any manner whatsoever" and covers activity over the internet, electronic networks or digital marketplaces. Payments and digital assets are separate items. Cinemas are added to ticketing.

Broader. Data monetization is the real widening. The split is mostly presentational.

User location (reg 5)

Four tests. Payment is by credit or debit facility from a Kenyan financial institution or company.

Six tests. Payment now includes any electronic payment system or wallet transfer or withdrawal. New test for network transmission or electronic communication originating from Kenya. IP address and telephone country code are separate.

Broader. The nexus is easier to meet, and any one test is enough.

Registration (reg 6(2))

Eight-item list, ending with "any other information the Commissioner may require."

Five-item list with no catch-all. The contact person must be in Kenya and responsible for tax matters.

The information is more prescriptive, and the open-ended request is gone.

Refund on exit (reg 10(2)(b))

Refund only if the non-resident has a licensed Kenyan bank account. It may be paid to a group company's Kenyan account on written notice and an indemnity.

Replaced by "s.47 TPA shall apply."

The bank-account and indemnity conditions are gone.

Enforcement (reg 12)

Reg 13 has three parts. The Commissioner may require financial institutions, customers, agents, or related parties to deduct and remit tax. Payments are credited to the taxpayer. Non-compliant appointees are personally liable.

Reg 12 only applies s.42 TPA when tax is unpaid, or when the Commissioner has reasonable grounds to believe it won't be paid by the due date.

The express third-party language is gone. The language is already included in the TPA so no need to include it.

Penalties

Reg 14 cross-refers to TPA penalties and interest.

Deleted.

Penalties presumably still apply under the TPA.

Filing deadline (reg 9)

The 20th of the month after the month in which the service was offered.

The 20th of the month after the month in which the income was derived from or accrued in Kenya.

Timing is now tied to when income arises, not when the service is offered.