The government plans to impose a 1.5 per cent tax on products that are sold through online platforms as it seeks to grow tax revenues.
In the Finance Bill 2020 tabled on Thursday in Parliament, the tax will be remitted by the eCommerce firms trading online.
“A tax to be known as the digital service tax shall be payable by a person whose income from the provision of services is derived from or accrues in Kenya through a digital market place,” reads the Finance Bill 2020.
“Provided that a resident persons or a non-resident person with a permanent establishment in Kenya shall offset the digital service tax paid against the tax payable for the year of income. The tax payable… shall be due at the time of the transfer of the payment for the payment for the service to the service provider.”
Treasury had last year made an attempt to tax digital transactions but this did not go through owing to lack of clarity in the definition of these transactions.
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The clarity revolved around questions such as what is meant by a digital marketplace. Much of the clarity has now been made in the Finance Bill 2020.
There is a divided opinion on whether to tax the online market places, with arguments on one hand noting that Kenya needs to ease up on taxing the nascent industry and instead give it room to grow.
On the other hand, there are arguments that firms operating on these platforms tend to repatriate profits to their home countries.