The Kenya Revenue Authority (KRA), has set up a special unit to track revenues from digital business in part of its measures to boost collection in a depressed economy.
The new unit, the taxman says, will facilitate taxpaying in the sector determining and accounting for taxes.
“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 targets revenues generated by technology firms that use the internet to market and/or sell products.
The Treasury imposed a levy of 1.5 percent on the value of digital transactions albeit with the acknowledgment that some of the transactions increasingly being carried out on digital platforms are difficult to effectively tax. The levy targets companies operating without a physical presence in Kenya, but that create value and income within its jurisdiction.
Besides income generated by firms in the digital marketplace, the regulator also looks at taxing people who buy goods and services online, following the published draft Value Added Tax (Digital Marketplace Supply) Regulations 2020.
According to the draft, the taxable digital content includes downloadable products including mobile applications, e-books, and movies as well as subscription-based media including journals, news, magazines, streaming of TV shows, and music, podcasts, and online gaming.
The taxman noted that some of the criteria that would make the services taxable include if they are paid for through a Kenyan bank, credit card, or SIM card and delivered to an IP address in the country.
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