The Capital Markets Authority (CMA) plans to engage the Government on the newly introduced digital tax, to safeguard gains made within the sector.
Luke Ombara, the director of regulatory at the CMA told a news conference on Wednesday that the Authority intends to examine the extent to which these exemptions apply to the Capital Markets industry participants, licensees and products.
The Authority will thus conduct an assessment in conjunction with the Kenya Revenue Authority, the outcome of which will inform targeted policy analysis and advocacy efforts aimed at promoting the growth of the Kenyan Capital Markets industry.
“With the implementation of the Regulatory Sandbox where some of the innovations will have digital platforms, the Authority will proactively engage the Government so that these services fall under the exempt services,” CMA also noted in its latest quarterly statistical bulletin.
The newly instituted Digital Services Tax (DST) came into effect on 2nd January 2021.
The Digital Service Tax was instituted in 2019 through the Income Tax Act, introducing a 1.5% tax on income earned or accrued through a digital marketplace.
The tax applies to the income of a resident or non-resident person derived from or accrued in Kenya from the provision of services through a digital marketplace. To effect this, the Income Tax (Digital Service Tax Regulations 2020) were gazetted on 11th December 2020.
The regulations list ten digital services for which digital service tax shall apply. These include Downloadable digital content including downloadable mobile applications, e-books and films, and over-the-top services, including streaming television shows, films, music, podcasts and any form of digital content.
The tax also covers the sale of, licensing of, or any other form of monetizing data collected about Kenyan users which have been generated from the users’ activities on a digital marketplace. Others hit by the new tax are firms providing subscription-based media including news, magazines, and journals.
Those exempted include online services which facilitate payments, lending or trading of financial instruments, commodities or foreign exchange carried out by a licensed or regulated financial institution.