Digital service tax becomes a reality in Yatani’s budget
The National Treasury on Thursday introduced digital tax, a Value Added Tax (VAT) on e-commerce services in the country, mostly targeting consumers who will be forced to have to pay higher for goods and services procured nline.
Treasury CS Ukur Yatani said that the Digital Marketplace Supply Regulations, 2020, will see online transactions attract a 1.5 percent digital tax as the government goes after the growing e-commerce in the country.
This move will see the likes of Netflix, HBO, Amazon Prime among others included in the tax regime in the country, many of whom signed to provide services to Kenyans and had not registered for VAT.
The Digital Marketplace Supply Regulations, 2020 introduces new obligations that are likely to disrupt operations for both local and international companies.
One aspect of the draft
One aspect of the draft is that the government will restrict these firms from the Kenyan market if they fail to comply with the regulations.
“A person who fails to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to restriction of access to the digital marketplace in Kenya until such obligations are fulfilled,” the regulations read in part.
The taxman defines digital suppliers as service providers either registered for VAT in Kenya, receive payments via credit cards, and bank accounts registered in Kenya from Kenyans or those who supply digital products for billing/ home addresses in Kenya.
The new law is pegged on the Value Added Tax Act, 2013 that set a 16 per cent rate, which was revised to 14 per cent in April this year following the outbreak of the coronavirus pandemic.
The proposals will also apply to digital news subscription-based media content including news, magazines, journals, streaming of TV shows and music, podcasts and online gaming shall also be subject to the new digital services VAT.
Among these suppliers who enjoy massive readership in the country include Wall Street Journal, Bloomberg and the New York Times.
Treasury also wants intermediaries who supply digital products on behalf of suppliers be required to charge and account for the VAT on such supplies whether such other person is registered for VAT or not.
The VAT proposals come in the wake of a new digital services tax introduced by the National Treasury that are expected to come in effect this financial year.