The Kenya Revenue Authority (KRA) has set up a special unit that will be tasked with tracking revenues from digital businesses.
The move follows the treasury’s proposal to impose a 1.5 percent levy on all digital transactions.
According to KRA, the new unit will facilitate tax payment from the previously unmanaged sector, as part of its measures to boost collection in the depressed economy.
“To ensure that the digital market sector pays their fair share of taxes, KRA has set up a dedicated unit to facilitate the taxpayers in this sector in the determination and accounting for taxes,” Deputy Commissioner in charge of policy and domestic taxes, Caxton Masudi said.
“We intend to use transaction tracers through data-driven detection in taxing multinationals as we roll out taxes on digital businesses.”
The digital tax is targeting revenues from Technology firms that market or sell their products online.
The 1.5 levy was imposed on the value of digital transactions although KRA acknowledged that some online transactions might be difficult to track and tax effectively.
Most of the targeted companies operate without a physical address in Kenya but command a large presence in the digital market. This include companies such as Netflix.
KRA is also targeting Kenyans who shop for their goods and services online in line with the published draft Value Added Tax (Digital Marketplace Supply) Regulations 2020
The taxable digital content includes downloadable products such as mobile applications,movies and subscription based media, e-books, journals, magazines, new, streaming of TV shows, streaming of music, podcasts, and online gaming.
KRA noted that the criteria that would make the services taxable include payment using a Kenyan credit or debit card or using mobile money transfer and delivery to an IP address within the country.