The Finance Bill in 2020 tabled on 5th June 2020 introduced a number of different taxes and duties. The Kenya Digital services Tax was among them.
What is the Digital Services Tax?
Kenya Digital Services Tax is a form of income tax enacted by the government of Kenya. It seeks to tax all the income that is received from all online transactions at a rate of 1.5% for individuals with permanent residence in Kenya.
Example
If you earn Kshs 1,000 online. Then 1.5% of the income, which is Kshs 15, should be submitted to KRA as the Digital Service Tax at the end of the year.
Who Does the Digital Tax Affect?
The digital tax affects both residents and non-residents that fall under the following bracket:
Digital Service Providers
Any individual that provides digital services through a digital marketplace to buyers as well as consumers.
Digital Marketplace Providers
This includes any person that provides an avenue that facilitates direct interaction between buyers and sellers of goods and services via electronic means.
All the digital service providers as well as digital service marketplace providers are bound by the Digital Service Tax. As soon as you use this medium to conduct your business and you are located in Kenya you have to give the KRA your dues.
This can be deemed binding when the user;
- Accesses services from a terminal that is found in Kenya.
- Paid for services using a credit card or debit facility of a financial institution in Kenya.
- The users billing address or residential address is in Kenya.
- The user used any of the Kenyan internet service provider.
According to KRA, for residents and companies with a permanent establishment in Kenya, the DST will be offset against the income taxes due in the year of income. For non-residents and companies without a permanent establishment in Kenya, DST will be a final tax.
Who shall be expected to remit DST?
- Over-the-top services, streaming television shows, films, music, podcasts and any form of digital content
- Sale of, license of or any other form of monetising data collected about Kenyan users has been generated from such users’ activities on a digital marketplace
- Subscription-based media–news, magazines and journals
- Streaming Services & transmission of data-monetised
- Downloadable digital content including apps, games, music, e-books
- Electronic data management: Web Hosting, Data Warehousing, File sharing and Cloud Storage
- Marketplaces, Websites that connect buyers and sellers e.g Airbnb, Taxi hailing services
- Search Engines & Help desk automation services
- Ticketing platforms; for live events, theatres, or restaurants
- Distance Learning Via pre-recorded medium or e-learning, including online courses
- Any other service provided through a digital marketplace that is not exempt under the Act
DST will be applicable in cases where the digital service or supply on a digital marketplace is provided to a user located in Kenya.
To find out more about the Digital Service Tax, you should read both the Finance Bill 2020 and the Income Tax Act (CAP 470).
You can also download and read this document shared by KRA on their website.