Kenya’s vibrant e-commerce sector is banking on an industry alliance to push policy reforms, remove regulatory bottlenecks, and unlock opportunities locally and in Africa.

This comes as the sector continues to attract government attention, with the Kenya Revenue Authority targeting e-commerce platforms, online stores, and digital content creators with specific taxes like VAT and the Significant Economic Presence Tax to increase government revenue.

Kenya charges VAT at 16 per cent on taxable goods and digital services.

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Local businesses must register for VAT if their annual taxable turnover is Sh5 million or more. For non-resident digital service providers, VAT registration and collection obligations apply upon the first sale to a Kenyan customer.

Significant Economic Presence tax is set at three per cent on gross turnover, applying to foreign digital service providers and non-resident platforms earning income from users in Kenya, having replaced the earlier 1.5 per cent Digital Service Tax.

Resident online sellers, freelancers, and e-commerce enterprises must declare online earnings and pay standard income taxes or corporate tax up to 30 per cent on profits, filing annual returns via the KRA iTax platform and must register for eTIMS, an automated compliance tool designed to streamline electronic invoicing, reduce tax fraud, and improve transparency.

The Kenya E-Commerce Alliance (KECA) launched during the Digital Trade Congress 2026 in Nairobi, bringing together businesses, online marketplaces, logistics providers, payment companies, technology firms, professional service providers and policymakers, is keen to address sector challenges.

The formation of the alliance comes at a time when Kenya’s e-commerce market is estimated at about $2.6 billion, or Sh336.7 billion, making it the third-largest e-commerce market in Africa.

The sector is projected to grow to about $3.83 billion (Sh496 billion) by 2029, supported by rising internet penetration, digital payments and growing adoption of online shopping.

However, industry players say the rapid expansion of digital commerce has exposed challenges around taxation, consumer protection, logistics, payments, regulation and cross-border trade, threatening to slow the ability of Kenyan enterprises to fully exploit the growing market.

KECA chief executive Martin Muli said stronger coordination between the private sector and government would be critical if Kenya is to turn the expansion of digital trade into sustainable business and export opportunities.

“Kenya has built a strong digital foundation, but the next phase is about making it easier for businesses to trade digitally, across borders and at scale,” said Muli.

“The Alliance provides a platform for the industry to articulate its challenges and work with government and other stakeholders on practical solutions.”

The alliance will focus on industry representation and advocacy, knowledge sharing, capacity building, market access and strengthening collaboration across the e-commerce value chain.

The government has increasingly identified digital trade as an important avenue for expanding exports, supporting small businesses and improving Kenya’s competitiveness in regional markets.

Timothy Were, Director of ICT and Trade at the State Department for Trade, said the alliance could provide a stronger channel through which businesses participate in discussions on laws and regulations affecting the digital economy.

“As an umbrella body for the industry, KECA should take a keen interest in the legal and regulatory framework being developed by the State by interrogating the policies and helping identify barriers faced by businesses,” Were said.

He said closer engagement between policymakers and industry players could help ensure that regulations are informed by the realities faced by businesses operating in the digital marketplace.

For small and medium-sized enterprises, establishing an online shop is only part of the challenge.

Businesses must also navigate payment systems, delivery networks, differing regulations and taxation requirements while building trust among consumers.

These challenges become even more complex when companies attempt to expand beyond Kenya into regional and continental markets.

GIZ-Kenya digital trade manager, Jennifer Chiku, said successful e-commerce markets depended on strong ecosystems rather than online marketplaces alone, pointing to the need for efficient digital payments, stronger consumer trust and seamless cross-border movement of goods.

The launch also comes as the African Continental Free Trade Area presents new opportunities for Kenyan businesses to access a wider market through digital platforms.

But industry players say unlocking this opportunity will require improvements in payment interoperability, logistics, trade facilitation, consumer protection and regulatory coordination.