The Kenyan Finance Act for 2025/26 offers both opportunities and challenges for the creative industries. While the Act aims to expand the tax base and enhance tax compliance, certain measures may disproportionately impact creative businesses, especially those operating in the digital space.
The Finance Act 2025/26 includes proposals that could raise the cost of doing business for creative enterprises. These proposals involve increased excise duties on airtime and data, as well as new environmental levies on equipment. Additionally, the removal of the KES 24,000 monthly withholding tax relief for creators will negatively impact smaller and newer players in the industry.
The Finance Act 2025/26 has eliminated the provisions concerning the Digital Assets Tax (DAT). As a result, DAT is no longer applicable to the transfer or exchange of digital assets. Instead, a 10% excise duty will be imposed on the fees charged by platform owners for transferring digital assets.
Two key digital taxes were introduced: a 3% Significant Economic Presence (SEP) tax and a 16% Value Added Tax (VAT) on digital services. The Finance Act 2025/26 expanded the scope of SEP tax and These taxes could hinder the growth of the digital creative economy.
The Finance Act's focus on digital transformation may open new opportunities for creative businesses to connect with broader audiences and monetize their work via digital platforms. However, one of the major obstacles to growth is the inadequate enforcement of intellectual property (IP) rights. Piracy is widespread, where creators frequently lose significant revenue due to unauthorized reproductions. It is essential to strengthen IP laws and implement effective enforcement mechanisms to protect the rights of Kenyan creatives.
There is a need for policy and regulatory reforms to make the sector more facilitative and competitive. Stakeholders should focus on building a resilient workforce by providing training and skills development to address the gaps and shortages in the creative industries. The reforms should aim to enhance exports of creative goods and services, thereby increasing the sector's contribution to the Kenyan economy.
By addressing these challenges and leveraging the opportunities presented by the Finance Act 2025/26, Kenya can unlock the full potential of its creative industries, fostering economic growth, job creation, and cultural preservation.