Kenya has seen tremendous growth in the use of technology with internet penetration at 89.5% of the population as at December 2019. Intense reliance on technology has been noted hence causing a huge transformation in the business environment. Finance Act 2019 (the “FA 2019”) amended the Income Tax Act to provide for taxation of income accruing through the digital market place. Taxation of digital economy has imposed new enforcement challenges to tax policymakers, tax authorities and governments. The challenges are attributed to complex nature of transactions carried out in the digital economy. The study identified several gaps such as difficulty in determining transactional value on income accrued or received in Kenya as harboured by jurisdiction issues in which value creation occurred. The gap will be addressed by review and amendment of Kenya’s double tax treaties, KRA and Communication Authority of Kenya to liaise in mapping of IP addresses to help in tracking transactions. Additionally, it is important to frame the DST around various revenue streams. Further, the research proposed raft of changes in the DST Act to minimise the potential for tax evasion and avoidance. Considering the legal perspective, the current Kenyan concept of permanent establishment especially regarding digital tax, does not establish a taxable presence. This is because it is mainly based on an entity as being physically present or having a physical representative in the country. Therefore, it will be necessary to come up with parameters defining what amounts to a digital permanent establishment (PE) or circumstances that will trigger a digital PE in Kenya. Without a nexus, KRA runs the risk of countless disputes.