• Yoland Swales

Kenya Revenue Authority Publishes Digital Tax Bill

Updated: Jun 17, 2020

On 10 June, the Kenya Tax Authority (KRA) published a draft Bill entitled The Value Added Tax (Digital Marketplace Supply) Regulations 2020. The KRA argues that while online businesses including tech giants Netflix, Google and other Over the Top (OTT) operators are not physically located in Kenya, they enjoy revenue through their local operations and will be liable for Value Added Tax (VAT).

The KRA is targeting companies active in the digital economy as it seeks to address budget deficits. To address this, it is therefore seeking novel sources of revenue. In 2019, the KRA hoped to introduce digital taxation via the Finance Bill however this was opposed by many stakeholders.

The Regulations prescribe that VAT will be levied on the following:

  • All downloadable digital content including downloading of mobile apps.

  • e-Books and movies.

  • All subscription-based media including news, magazines, journals, streaming television shows, music, podcasts and online gaming.

The Bill deems that digital digital marketplace supply is considered to be conducted in Kenya where the billing, consumer’s home address or access proxy including Internet Proxy Address, or the recipient’s mobile country code of SIM card is in the country.

It is reported that the KRA is still engaging stakeholders in order to refine clear guidelines in relation to international companies and there are fears that the digital tax will endanger trade relations, especially with the United States.

Nanjira Sambuli, a tech policy analyst and board member at the UN’s Digital Impact Alliance, opines that the Kenyan digital tax raises interesting questions regarding governments’ need to find new sources of revenue even where the costs are passed onto consumers. Sambuli notes too that the issue of levying tax on companies which are registered outside local jurisdiction is highly topical.

The digital tax will apply to all international and local digital businesses trading in Kenya from January 2021 if the Bill is passed.

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