Kenya Airways’ foreign software suppliers will not pay the new digital service tax. This spares the airline from extra costs on booking systems and avionics.
Treasury CS John Mbadi issued draft rules on the tax. The rules exempt digital service providers that supply an airline where the government owns at least 45 percent. The SEP tax charges three percent of gross turnover.
Kenya Airways uses a central system for passenger bookings and loyalty programs. These services cost the airline Sh8.77 billion in 2024. It also uses avionics for landing, handling, and navigation. These costs reached Sh21.97 billion that year.
Amadeus provides KQ’s booking platform and real-time offers. Major avionics suppliers include Collins Aerospace, Honeywell Aerospace, Thales, Safran, L3Harris, and Boeing AvionX. Collins Aerospace supplied TCAS systems for KQ’s Boeing 777 fleet.
Without this exemption, suppliers would have paid billions in taxes. They would also have passed these costs to KQ. PKF tax partner Michael Mburugu said airlines buy many digital services, including weather data. He added that these services involve huge payouts.
The SEP tax replaced the Digital Service Tax, which was set at 1.5 percent. It targets foreign firms operating in Kenya without a physical office. These include Amazon, Microsoft, Netflix, and Alibaba.
The Finance Act 2025 also removed withholding tax on payments to foreign providers. It applies to technical, maintenance, training, compliance, and digital systems support not available locally.
Maintenance remains one of KQ’s largest expenses. The airline often hires foreign experts for engine overhauls and other complex services.
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