Kenyan Content Creators Struggle as New VAT Policy Increases Costs

Digital Economy Faces Tax Challenges

Content creation in Kenya has evolved from a casual pursuit to a serious revenue generator for the youth, contributing significantly to economic growth. While President William Ruto has promised a digital revolution, new VAT charges on digital services are making it harder for creators to sustain their online businesses.

Many young creators now question whether the government is genuinely supporting digital innovation or simply taxing it out of existence.

AI Tools Become Essential for Creators

Platforms like OpenAI, Canva Pro, Adobe Firefly, and Runway ML have become indispensable for Kenyan content creators. These tools enable small teams and individuals to produce professional-grade content that competes globally.

However, recent tax changes are increasing costs. OpenAI, for example, now requires Kenyan users to provide their KRA PINs for VAT compliance. A $20 monthly ChatGPT Plus subscription will now cost approximately Sh3,680 annually instead of Sh3,170.

Financial Strain on Digital Entrepreneurs

The new VAT policy, effective May 1, 2025, adds a 16% tax on digital services under Kenya’s VAT E-Invoicing and Digital Management System (EIDMS). While intended to expand the tax base, it has created financial pressure for freelancers and digital entrepreneurs operating on tight margins.

Mohammed Alby, a popular TikTok and YouTube creator, expressed frustration: “We find creative ways to earn, only to face heavy taxes. This makes it harder for new creators to enter the space.”

Impact on Kenya’s Digital Workforce

According to a 2023 Kepsa report, over 1.2 million Kenyans earn income through digital platforms, most under 35. These individuals represent the future of Kenya’s workforce but face growing challenges from high equipment costs, internet expenses, and now increased taxation.

Actor and digital creator Kevin Maina noted: “Without proper support, these taxes only strain creators who are already struggling to grow their businesses.”

As Kenya’s digital economy continues to evolve, the balance between taxation and support for innovation remains a critical issue for content creators and digital entrepreneurs.