The Kenya Revenue Authority has announced that the digital service tax (DST) that had been proposed by the Budget Committee of the national assembly under Finance Act amendment in 2020/2021 budget formulation process in bid of widening tax bases will take effect in January 2021.
The digital tax was set at 1.5% of the transaction value of all the technological revenue of firms operating in the country through applications like Uber, Netflix which are firms that market and sell their products online or services including the e-commerce platforms without necessarily having a physical office in the country.
To this effect, KRA has already constituted a unit within its division that will be tracking the taxes from the digital platforms and businesses. The new unit is solely dedicated to devote its synergies on the taxes from a previously untaxed businesses in bid to scale up the revenue generation from taxation.
The 1.5% digital tax execution may be challenging as quantifying services in platforms like google may be a challenge as per the KRA admission. “we intend to use transaction-tracers through data-driven detection in taxing multinationals as we roll out taxes on digital business” said KRA’s Deputy Commissioner in charge of Policy and Domestic Customs earlier in June 2020.
Dominance of the social media platforms giants google, Netflix for streaming and uber among taxi-hailing in the Kenyan market despite not being physically presence in the country has thrown the government in confusion in proper and effective way of taxation until the Budget Committee came up with DST.
Kenyans who shop goods from online retailers like Amazon will not be spared as well as they will be subjected to the Digital Market Supply regulations 2020.
E-books, journals, subscription-based media, mobile applications, movies, podcasts, streaming of movies, online gaming, magazines streaming of TV shows are among the taxable content that the KRA are keeping an eye on once the Digital Service Tax takes effect in January 2021.
Payments using Kenyan credit card or debit card or using mobile money transfer and delivery with an IP address in Kenya will automatically make the service taxable in Kenya as per the Finance act 2020 assented to by the president and will effectively be subjected to 1.5% rate on the transaction done.