If Parliament in Kenya adopts the Finance Bill 2021 as planned, income earned from the internet and electronic networks would henceforth be taxed.
This comes after the National Treasury broadened the scope of the digital service tax to cover, among other things, revenue from Youtubers, bloggers, online education, and online marketing.
The Digital Service Tax, which was established by the Finance Act of 2020, only applied to revenue received through the digital market place and was primarily aimed at foreign businesses operating in Kenya.
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This idea was presented when the government determined that the present tax rules did not cover all merchants who utilize the digital service platform to transact their companies, according to National Treasury Cabinet Secretary Ukur Yattani’s 2021/22 budget statement.
In order to increase income, the government extended the words “digital market place” and “digital service” in the Finance Bill 2021 in order to collect more taxes from the internet sector.
“A digital market place,” according to the law, is “an online platform that allows users to sell or offer services, products, or other property to other users.”
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“A business carried out through the internet or an electronic network, especially through a digital marketplace,” according to the definition of “digital service.”
Games, e-books, cloud-based software, websites, and streaming music are all examples of digital services.
Online buying sites like Aliexpress, streaming platforms like Netflix, and car hailing services like Uber are all examples of digital markets.
Kenyans using online services have begun to feel the impact of the DST, which is a 1.5 percent tax on revenues produced through digital transactions.
Yattani also modified the Tax Procedures Act in the Finance Bill 2021, allowing the Kenya Revenue Authority to request the involvement of other agencies to help with compliance with the digital service tax’s requirements.
As KRA attempted to apply the tax, it encountered several complications and misunderstandings
If parliament passes the finance law for 2021, the DST may only be charged by non-residents who sell to Kenyans online.
By June 30, 2021, Parliament is anticipated to revise and adopt the recommendations in the Finance Bill 2021.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write