ONLINE LEVY

KRA seeks views on digital tax

Regulation will come into effect on January 1, 2021

In Summary

•The tax is payable at a rate of 1.5 per cent of the gross transaction value.

•It is charged on income derived from or accrued in Kenya from service offered through a digital market place.

A man looks at mobile phones on Jumia site/FILE
A man looks at mobile phones on Jumia site/FILE

Taxpayers have been called to give their views to the Kenya Revenue Authority(KRA) on the newly introduced Digital Service Tax (DST).

National Treasury Cabinet Secretary Ukur Yatani has set January 1, 2021 as the effective date for the regulations, which seek to tax the digital market place.

The taxman has invited the e-commerce sector players, tax professionals and the general public to submit their comments on the new regulations to be gazetted ahead of its implementation.

The invitation for comments is part of consultations and public participation requirement stipulated in the Constitution and the Statutory Instruments Act, 2013.

Written comments can be sent either by post or email addressed to the Commissioner General for review and finalisation of the Regulations by August 24.

The tax, according to the Finance Act 2020, is payable on income derived from or accrued in Kenya from service offered through a digital market place.

The digital market place comprises online platforms that enables direct interactions between sellers and buyers of goods and services.

DST is payable at a rate of 1.5 per cent of the gross transaction value and is due at the time of transfer of payment for the goods or service to the provider.

While the tax is a final tax for non-resident individuals and corporate bodies,it is an advance tax for the residents who will offset the tax against the corporation tax that is due for the year of income.

DST is collected and remitted by agents appointed by the Commissioner of Domestic Taxes.

Non-resident companies who conduct business in Kenya through an online platform but do not have physical presence in Kenya are required to appoint local tax representatives to account and remit the taxes on their behalf.

"DST is intended to address the change in transactional models as well as expand the tax base," Commissioner for Domestic Taxes Elizabeth Meyo said in a statement.

In April, KRA informed the owners of the digital market places (online trading platforms) that they are also required to charge and account for the VAT on all sales made on their platform.

This is due to the amendments to the VAT Act, 2013 by the Finance Act, 2019, stating that VAT is applicable to supplies made through a digital marketplace.