ONLINE LEVY

KRA cleared to tax digital businesses

This follows gazettement of the digital marketplace regulations 2020.

In Summary

•This gives KRA the go ahead to start putting in place systems that will enable taxing of the digital market place.

•National Treasury Cabinet Secretary Ukur Yatani has set January 1, 2021 as the effective date for the regulations.

The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

You will start paying taxes on your transactions on Google, Amazon, Jumia and other online platforms, as government moves to implement the new tax regime.

National Treasury Cabinet Secretary Ukur Yatani has gazetted the Digital Marketplace Supply Regulations, 2020.

This now gives Kenya Revenue Authority (KRA) the go-ahead to roll out systems that will enable it to net the much-needed revenues from the digital market place.

 

National Treasury Cabinet Secretary Ukur Yatani has set January 1, 2021 as the effective date for the regulations, which is about three and a half-month away.

“These Regulations may be cited as the Value Added Tax (Digital Marketplace Supply) Regulations, 2020,” Yatani says in the gazette notice dated September 25.

Digital marketplace supply is defined as any supply of a service made over a platform that enables the direct interaction between buyers and sellers of services through electronic means.

It targets both domestic and international market places doing business with individuals or entities in Kenya.

Taxable supplies made through a digital marketplace shall include electronic services, downloadable digital content including downloading of mobile applications, e-books and movies.

Subscription-based media including news, magazines, journals, streaming of TV shows and music, podcasts and online gaming will also be taxed.

Software programs including downloading software, drivers, website filters and firewalls will attract a levy.

 

Tickets bought for live events, theatres, restaurants purchased through the internet, the supply of digital content, transport hailing platforms and any other digital marketplace supply, as may be determined by the Commissioner KRA, will be taxed.

This means popular digital content and service providers such as Google, Amazon, Jumia and Netflix will be affected.

Taxi-hailing apps such as Uber, Bolt and Taxify will also be on the taxman's bracket once the regulations take effect.

KRA had in August sought public opinion and input ahead of gazettement.

“To ensure wide consultation and public participation, the Kenya Revenue Authority invites sector players, tax professionals and members of the public to submit their comments on the draft regulations,” Commissioner General, James Mburu said in the notice.

The new tax 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.

It 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.

Under the new tax law, companies that offer digital services in the country will be required to register for VAT or appoint a tax representative before being allowed to operate.

“A digital marketplace supplier under these regulations who is from an export country shall be required to register under the simplified VAT registration framework,” CS Yattani had said earlier before gazetting the law.