Kenya’s New Mobile Tax Compliance Rules Set to Impact Market from 2025

• Oct 28, 2024

The Communications Authority of Kenya (CA) has announced new regulations, effective January 1, 2025, designed to strengthen tax compliance within the mobile device market. This initiative is intended to boost tax revenue and ensure all mobile devices sold in Kenya meet tax standards set by the Kenya Revenue Authority (KRA). Under these new rules, local assemblers, importers, retailers, and mobile network operators will each have specific obligations to enhance tax accountability for mobile devices across the nation.

Starting November 1, 2024, the new compliance standards will apply to all imported or locally assembled devices, with any devices currently on mobile networks by October 31, 2024, exempt from the changes. Key regulations include the mandatory registration of International Mobile Equipment Identity (IMEI) numbers for all devices. Local assemblers will be responsible for uploading these IMEI numbers to a KRA portal, while importers must include IMEI numbers in import documents. This registration process will create a National Master Database of Tax-Compliant Devices, allowing the KRA to track tax compliance efficiently.

Retailers and wholesalers will also have new responsibilities, as they will be required to verify that devices are listed as tax-compliant before distributing or selling them. The CA plans to implement a verification system that retailers can use to confirm a device’s compliance. Mobile network operators will be restricted to connecting only devices listed on an official whitelist of tax-compliant devices, and non-compliant devices will be first greylisted, then blacklisted if they fail to meet tax requirements within a specified period.

While the policy aims to ensure higher tax revenues, it could lead to several side effects. Increased compliance requirements and excise duties on mobile devices could translate into higher prices, making mobile technology less affordable, especially for low-income individuals. The Groupe Speciale Mobile Association (GSMA) has previously noted that high mobile service taxes can deter digital adoption and potentially reduce government revenue. In Kenya, excise duty on mobile services has risen from 10% in 2018 to 20% by 2021, one of the highest rates in Sub-Saharan Africa, reflecting the government’s focus on extracting higher revenues from the telecom sector.

This latest round of regulation could bring new challenges for Kenya’s mobile market, potentially impacting affordability, availability, and overall market stability. However, the CA believes that a more controlled market will ultimately promote greater digital inclusion by encouraging tax-compliant business practices across the mobile ecosystem.