The Kenya Revenue Authority(KRA) has updated its iTax system as it prepares to start taxing firms and individuals who source their income in the digital marketplace, come January 2021.
The fully-integrated and automated iTax system, which replaced the Integrated Tax Management System (ITMS), has simplified tax processes, shortened the time taken to file iTax returns and increased revenue collection.
The KRA Online iTax portal will now be used by firms and individuals in the digital space to meet their tax obligations. A taxpayer can also file PAYE, VAT, Corporate Tax, Partnership Tax Returns and Excise Duty on this portal.
This digital tax will be charged on the gross transaction value of digital services, subject to a 1.5% digital tax.
For Kenyans and non-residents with permanent establishments in Kenya, the tax will be available for offset against their income liability for that year.
Kenya Revenue Authority will appoint an agent for the purpose of collection and remittance of digital service tax.
It is still unclear how KRA will navigate the digital space-that is intertwined in an elaborate web of many service providers.
Collection of digital tax will rely heavily on self-assessment with players in the digital space required to register with the tax authority.
Grey areas in the implementation of digital tax in Kenya includes how to deal with loss-making IT firms and how KRA will deal with multinationals, especially those IT giants from the USA.
The American administration has already threatened to take retaliatory measures against nations that levy digital tax on its companies abroad.
The UK introduced digital services tax from April 1, 2020, joining France and Italy- which already have in place broadly similar taxes. The UK’s digital services tax is at the rate of 2% on revenues made by large firms that provide a social media service, search engine or online marketplace to UK users.