The Kenya Revenue Authority is set to double the tax collected from tech giants operating or facilitating digital payments in the country.
Amazon, Google, Apple, Netflix, Twitter, Paypal and Facebook are among the companies that will be affected by the proposed tax raise from 1.5% to 3%. The treasury made this proposal through the Finance Bill 2022. The new tax regime will take effect from July this year.
“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five per cent’ appearing in paragraph 12 (digital service tax rate) and substituting therefor the expression ‘three per cent’,” Treasury Cabinet secretary Ukur Yatani wrote in the Finance Bill 2022.
Last year, Kenya withheld its vote on the 15 per cent tax rate agreement under the Paris-based Organization for Economic Cooperation and Development (OECD). The deal is meant to force big tech firms to pay a fair share of tax generated from their economic activities.
Kenya pulled out of the pact arguing that it had clauses going against the Digital Service Tax(DST) introduced in January 2021. Other countries that didn’t sign the pact include Nigeria, Pakistan and Sri Lanka.
In the fiscal year ending June 2022, Kenya is set to collect Sh3.4 billion through the DST, raise Sh5.0 billion in the next financial year and Sh5.5 billion in 2024.
KRA targets companies selling e-books, music, games, movies and facilitators of digital transactions. The tax will be applicable to only non-resident firms after KRA the Finance Act 2021 which took effect from July 1, 2021.
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