What the Finance Bill Means for Remote Workers and Digital Creators

 What the Finance Bill Means for Remote Workers and Digital Creators

The Kenya Finance Bill 2024 brings major tax changes aimed at the digital economy, significantly impacting online workers and digital content creators.

Despite nationwide protests, mainly from Gen Z under the #rejectfinancebill Movement, the bill was passed.

 Key Changes

Significant Economic Presence Tax (SEP):

- Replaces the 1.5% Digital Service Tax (DST).

- Set at 30% for non-resident entities without a permanent establishment in Kenya but earning from digital marketplaces.

- Applied to 20% of gross turnover, increasing the tax burden on international freelancers and digital service providers.

Withholding Tax (WHT) Amendments

- 20% WHT on income from digital marketplaces for non-residents.

- 5% WHT for residents.

- Affects earnings from platforms like Remotasks, Fiverr, and Upwork.

Impact on Freelancers and Content Creators

Content creators, including comedian Eric Omondi, have actively protested, warning that the tax could severely impact their earnings and the growth of the digital content industry. For Kenyan remote workers, increased taxes on income from digital marketplaces may slash their net earnings, making remote work less viable. They might need to renegotiate contracts or adjust service rates to offset the higher tax burden.

For expatriates working remotely for international companies, the SEP tax and revised WHT rates mean more complex tax compliance. They must accurately report earnings and comply with new withholding obligations, increasing administrative burdens and costs for tax filing and professional advice.

Economists warn these changes could stifle the growth of Kenya's digital economy by reducing the attractiveness of online work as a source of income.

What to Expect

If passed into law, these changes will take effect between July 2024 and January 2025. Online workers and digital content creators in Kenya must monitor these developments closely and may need professional advice to navigate the new tax landscape.