The National Treasury has set its sights on firms engaged in the digital space by widening the tax net to include firms involved in this nascent segment of the economy.
This is as social distancing measures, lockdowns, and night curfews shift activity of firms from brick and mortar to interacting with their clients through electronic platforms.
Through Kenya Revenue Authority(KRA), Treasury has thus published a draft law that will require firms and individuals engaged in the supply of services made over the digital platform to be registered for Valued Added Tax (VAT).
Firms targeted by the taxman in the draft VAT law include mobile phone operators who sell downloadable digital content including mobile applications, e-books, and movies; subscription-based media including news, journals, magazines, streaming of TV shows and music, podcasts, and online gaming and software programs including downloading of software, drivers, website filters and firewalls.
The Draft VAT( Digital Marketplace Supply) Regulations 2020 also require firms involved in electronic data management including online data warehousing, website hosting, file-sharing, and cloud storage services; supply of music, films, and games; supply of search-engine and automated help-desk services including supply of customized search-engine services, to register for VAT.
Furthermore, firms that sell tickets 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 and supply of digital content for listening, viewing or playing on any audio, visual or digital media, are also expected to adhere to the new tax rules.
This draft law also covers the supply of services on online marketplaces that link the supplier to the recipient, including transport hailing platforms and any other digital marketplace supply, as may be determined by the Commissioner.
KRA invites players in the digital space, tax professionals, and the public to submit their comments on the draft regulations on or before 15th June 2020 to facilitate the review and finalization of the Regulations.
Individuals who fail to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to a restriction of access to the digital marketplace in Kenya until such obligations are fulfilled.
ALSO READ:
