KRA Wants Netflix, Uber, and Other Online businesses To Start Paying Income Tax

Kenya is going all-in in the taxation of online-based businesses according to a new digital Tax proposition by Kenya Revenue Authority (KRA). This includes everything making cash from the internet.

The proposition will see digital tax applied to Subscription-based media, including journals, magazines news, streaming services (e.g. Netflix); podcasts; online gaming; music;  downloadable digital content, including mobile apps, e-books, and films; and even software programs.

Also, the taxman will now require businesses that offer digital services like web hosting, and cloud storage services, to charge and remit taxes.

The informal sector is also included from e-learning services, sale of events tickets, search-engine and automated helpdesk services and other various supply channels of digital content.

“The regulations relate to any supply of a service made over a platform that enables the direct interaction between buyers and sellers of services through electronic means,” the draft reads.

The recently published draft on Value Added Tax (Digital Marketplace Supply) Regulations, 2020, by the National Treasury brings the much-anticipated tax inclusion of the digital market place by Kenya’s tax collector.

Tax inclusion in the online business industry, perhaps, means more cost to the end consumer. A good example will be on services like ride-hailing services (Uber and Little) as well as streaming services like Netflix.

The proposed KRA Digital Services Tax will see vendors pay 1.5 percent of all the gross transaction values as income tax.

Digital businesses will also have to adhere to the taxman’s prescribed timelines as to when the taxes should be remitted. Failure to which will attract penalties and worst of all restrictions to the digital marketplace.

The new draft comes at a time when Kenya’s tax collection firm – Kenya Revenue Authority – has been growing interest in taxing the digital economy as a way of widening their tax revenue.

In April, the firm raised concerns in a public statement on online sellers for either not charging VAT on goods sold online or failing to file their tax returns.

Citing VAT Act 2013, the firm, at the time, said online sellers have an obligation to charge and remit taxes not only on all sales made online but also on commission charged to the vendors for the use of their digital platforms to transact.

The taxman has been missing on its revenue collection targets continuously in the recent past and the current push to tax the digital marketplace might help save on some of those predicted revenue misses.

The draft follows the passage of provisions on taxing the digital market place through the Finance Act, 2019 in November last year.

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Alvin Wanjala

Alvin Wanjala has been writing about technology for over 2 years. He writes about different topics in the consumer tech space. He loves streaming music, programming, and gaming during downtimes.

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