The Kenyan government plans to impose a 1.5% digital tax on the value of online/digital transactions, according to proposals in the Finance Bill 2020, cashing in on a nascent industry taking off amid the COVID-19 pandemic.
Additionally, the government will also start levying a minimum gross sales tax of 1% and proposes a minimum tax for all companies. However, the minimum tax will require even loss-making firms to remit tax based on their sales.
Other inclusions in the Finance Bill, 2020 include:
- Capital Markets Authority CMA) to license and regulate private equity and venture capital firms seeking access to public funds
- A 2.5% tax on the customs value for goods manufactured in export-processing zones (EPZs) that are sold in the local market
- Retirement Benefits Authority (RBA) to penalize pension funds which fail to submit actuarial valuation reports within the specified periods
- Establishment of a 3-year voluntary tax disclosure program through which taxpayers can disclose unpaid tax liabilities in exchange for some relief on penalties and interest
As Bloomberg reports, the draft measures are set to be presented to the National Assembly for a first reading on 6th May 2020.
Still, if implemented, Kenya will not be the first country to go in that direction, taxing digital transactions.
In 2016, India imposed digital taxes on tech companies involved in digital advertising. In 2018, the country went further and introduced a provision requiring companies to pay tax on domestic income accrued from digital platforms.
Furthermore, in 2019, France proposed a digital tax where tech companies would be required to pay a 3% tax on the gross revenues derived from digital activities of which French “users” are deemed to play a major role in value creation. The laws also introduced a threshold for annual revenue generated. This was $813 million for taxable digital services supplied worldwide, $27 million for taxable digital services supplied in France.
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