Why you will pay more to use Zoom

Video conferencing platform Zoom is the latest to announce changes in VAT pricing for Kenyan users beginning next month. [Courtesy]

Technology platforms operating in Kenya have begun implementing the recent digital tax measures introduced by the National Treasury in a move that is set to increase the cost of accessing these services.

Video conferencing platform Zoom yesterday became the latest firm to announce the changes to its pricing for Kenyan users beginning next month. This is as the company implements the new value-added tax (VAT) charges on digital services.

“We are writing to inform you that Zoom Video Communications Inc (Zoom) will begin charging Kenyan VAT on or shortly after August 1, 2021, on its services supplied to customers in Kenya,” stated the firm in an email to users.

“Like many companies with a growing international presence, Zoom is routinely evaluating its indirect tax collection and remittance obligations,” stated the firm.

Zoom’s announcement to users in Kenya is the latest from Silicon Valley as the implementation of the new levies recently introduced by the government and targeted at digital platforms gets underway. 

Last year, Treasury through the Finance Act 2020 introduced the Digital Services Tax (DST), payable on income accrued in Kenya from services offered through a digital marketplace.

The levy is set at 1.5 per cent of the gross transaction value and is due at the time of transfer of the payment to the service provider.

This was soon followed by the Value Added Tax (Digital Marketplace Supply) Regulations 2020 that proposed VAT on products and services sold online.

“VAT shall be charged on taxable services supplied in Kenya through the digital marketplace,” explains the regulations in part. “Taxable supplies made through a digital marketplace shall include electronic services and downloadable mobile apps, e-books, movies.”

The law does not indicate the new VAT rate but is pegged on the Value Added Tax Act, 2013 that set a 16 per cent rate. A digital marketplace has now been defined as an ‘online platform which enables users to sell or provide services, goods or other property to other users.”

Zoom’s announcement to users in Kenya is the latest from Silicon Valley as the implementation of the new levies. [Courtesy]

Earlier this year, Facebook informed Kenyan users that advertisements on the site and photo-sharing application Instagram that charges would increase to reflect the new VAT levy.

“Beginning April 1, 2021, Facebook ads in Kenya are subject to a VAT at the applicable local tax rate,” said Facebook in an email to users.

“This applies to advertisers whose ‘Sold To’ country on their business or personal address is set to Kenya and who haven’t confirmed that they’re advertising for business purposes,” stated the email.

“VAT is added whenever you’re charged for your ads if you’re not purchasing Facebook ads for business purposes,” said the firm. “Because VAT is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold amount.” However, some industry stakeholders have cautioned that the administration of the taxes could prove difficult for tax authorities given the complexity of the Internet ecosystem. 

“The application of these taxes to businesses with online activities is a complex and evolving area,” said Zoom in its email to users.

“Zoom continues to review such developments as well as the nature and extent of its activities in different jurisdictions and based on such regular review, will start charging indirect taxes where applicable.”