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Netflix, Uber Prices Set to go up as Kenya Imposes Double Tax on Foreign Tech 

Kenya imposes double tax on big tech

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Kenya’s digital tax is set to double to the gross value of online transactions in the Financial year starting July. The treasury proposed the changes which will affect transactions through platforms belonging to tech giants such as Netflix, Amazon, Spotify and Paypal.

“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five percent’ appearing in paragraph 12 (digital service tax rate) and substituting therefore the expression ‘three percent’,” Treasury Cabinet secretary Ukur Yatani wrote in the Finance Bill 2022.

In a rapidly digitalizing global economy, the Kenya Revenue Authority (KRA) has recognized foreign enterprises that derive income in Kenya through digital marketplaces – selling entirely online or providing venues for such transactions — as a major generator of tax receipts.

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Online transactions increased during the Covid-19 pandemic as more businesses opted to provide digital options to consumers.

“The exchequer is trying to ensure they get a fair share of the pie because half of the business went online during Covid hence the plan is to increase DST to capture that business that has gone online,” said Philip Muema, a partner at tax and business advisory firm Andersen Kenya, told Business Daily.

The 1.5 tax is applied on the sale of digital content such as e-books, movies, music, games from foreign companies.

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Originally, KRA intended to target a percentage of revenue generated by resident and non-resident businesses selling products over the Internet. However, this was altered in the Finance Act 2021 to apply to non-resident businesses beginning July 1, 2021.

“Members who join the statement are obliged to withdraw their unilateral measures such as digital services tax and similar measures imposed on non-resident companies which do not have a physical presence in the market jurisdiction,” Terra Saidimu, KRA Commissioner for Intelligence and Strategic Operations, said last October.

Digital service tax (DST) receipts are expected to hit Sh3.4 billion in the fiscal year 2022, Sh5.0 billion the in the fiscal year 2023, and Sh5.5 billion in fiscal year 2024.

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Written by Vanessa Murrey

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