Kenya Revenue Authority (KRA) will start demanding a 1.5 per cent digital tax on the value of digital transactions effective January 1, 2021. The move by Kenya Revenue Authority to tax online business will be as per the Finance Act 2020, in order to widen the tax base in the country.
In their Twitter account, KRA said that “Introduction of the Digital Service Tax (DST) is payable by a person who derives or accrues income from services through a digital marketplace at the rate of 1.5% of the gross transaction value.”
Introduction of Digital Service Tax (DST)
Payable by a person who derives or accrues income from services through a digital market place at the rate of 1.5% of the gross transaction value. @KRACare
Effective Date: 1st January 2021. #FinanceAct2020
— Kenya Revenue Authority (@KRACorporate) August 6, 2020
The move which targets local firms and multinationals like Uber, Facebook and Netflix operating locally also affects individuals including artists and even websites owned by individuals as Treasury seeks new areas for more revenue.
The Digital Tax Service also targets websites, web hosting services, remote maintenance of programs and equipment, software and updating of software, access to databases, self-education packages, music, films or games and political, cultural, artistic, sporting, scientific and other broadcasts and events including broadcast television.
Kenya boasts one of the fastest internet speeds and internet penetration in Africa. As a result, there has been an increase in internet users. It is not clear how international online businesses that operate in Kenya such as Google, Facebook, Twitter, and Instagram who have no physical presence in Kenya will be taxed. However, there will be an expected increase in the prices of products and services offered by online businesses, which will affect the Kenyan consumer in the long run. Further, online businesses are already being affected by the COVID 19 pandemic. It will be interesting to see how this will be implemented.
Here are some of the views from Kenyans on social media.
Taxes already burdening small jobs
Value added tax
Now digital service tax 1.5%..that doesnt care whether u make losses or profits..you have to pay on the little u earn
— katululu (@Kamtu_Ka_Chai) August 6, 2020
Instead of the Kenyan government encouraging and investing in digital market it has started to trim it even before it sees light of day. So, Ajira Digital Program was a waste of our taxes.
— Jimmy Em🎶 (@Mutembeijey) August 6, 2020
Being a Kenyan is such a burden! Digital space is just 5percent in contribution to a struggling economy but Noooo we had to tax it before investing in it.
— sekani (@sekani66876960) August 6, 2020