The tax proposal in Kenya’s digital market space is likely to influence the adoption of technology in the coming years if adopted.
The Kenya Revenue Authority has sent an invite to the public for comments on the changes seeking to introduce taxes on downloadable digital content including e-books, movies, and mobile applications.
Taxable supplies to be made through a digital marketplace shall include electronic services under section 8 (3) of the act and subscription-based media including news, magazines, journals, streaming of TV shows and music, podcasts, and online gaming.
The proposal states that a digital market place supply shall be deemed to have been made in Kenya where the recipient of the supply is in Kenya, the payment proxy including credit card information and bank account details of the recipient of the digital supplies is in Kenya; or the residence proxy including the billing or home address or access proxy including Internet Proxy address, mobile country code of SIM card of the recipient is in Kenya.
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“Following the amendments to the VAT Act, 2013 by the Finance Act, 2019, clarifying that VAT applies to supplies made through a digital marketplace, the Kenya Revenue Authority would like to inform members of the public that the draft value-added tax (digital market place supply) regulations, 2020 have been developed and are currently hosted on the Kenya Revenue Authority website.”
“To ensure wide consultation and public participation we invite sector players, tax professionals and members of the public to submit their comments on the draft regulations before June 15.”
List of areas targeted for taxation
- Software programs including downloading of software, drivers, website filters and firewalls;
- Electronic data management including website hosting, online data warehousing, file-sharing, and cloud storage services.
- Supply of music, films, and games
- Supply of search-engine and automated helpdesk services including supply of customized search-engine services
- Tickets bought for live events, theaters, restaurants, etc. purchased through the internet
- Supply of distance teaching via pre-recorded medium or e-learning including the supply of online courses and training
- Supply of digital content for listening, viewing or playing on any audio, visual or digital media
- Supply of services on online marketplaces that links the supplier to the recipient, including transport hailing platforms
- Any other digital marketplace supply as may be determined by the Commissioner.
If adopted, a person supplying taxable services through a digital marketplace shall be required to register for VAT in Kenya where the digital marketplace supplies are supplied by a person from a place of export country to a recipient in Kenya in a business to consumer transaction.