The proposed 1.5% digital services tax in Kenya is set to start being implemented from January 1, 2021. This is after President Uhuru Kenyatta gave a green light to the Value Added Tax (Digital Marketplace Supply) Regulations, 2020 draft yesterday.
Now that the President has signed it, companies in the digital space will have to pay 1.5% of their gross sales to the taxman.
The law defines “digital marketplace supply” 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 has a wide scoop of taxable services from downloadable digital content to subscription-based media.
Here’s the full list of taxable services according to the law;
- 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;
- Software programs including downloading of software, drivers, website filters and firewalls;
- Electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services; (e) Supply of music, films and games;
- Supply of search-engine and automated helpdesk services including supply of customized search-engine services;
- Tickets bought for live events, theaters, restaurants etc. purchased through the internet;
- Supply of distance teaching via pre-recorded medium or e-learning including supply of online courses and training;
- Supply of digital content for listening, viewing or playing on any audio, visual or digital media;
- Supply of services on online marketplaces that links the supplier to the recipient, including transport hailing platforms;
- Any other digital marketplace supply as may be determined by the Commissioner.
Handling digital service tax
In line with the upcoming digital service tax, the Kenya Revenue Authority is set to handle the new income source. The authority has already formed a special unit that will collect taxes from players in the digital marketplace.
KRA said last week it will use data-driven detection in taxing multinationals i.e. Netflix.
The taxman will collect taxes from any firm whether they have a residence in the country or not as long as their digital content is paid for through a Kenyan bank, credit card or SIM card and delivered to a local IP address.