This would make or mar the Kenyan startup ecosystem, take it or leave it. Kenyan Revenue Authority (KRA) is introducing for the first time, a 16% value-added Tax (VAT) for every download and resultant revenue on all mobile applications in Kenya.
Here Is All You Need To Know
- Kenyan Revenue Authority says the provision of online platforms for use by third-parties has always been a taxable supply under the VAT Act 2013.
- Hence, bringing it to the table now does not make much difference.
- KRA Deputy Commissioner for Corporate Policy, Maurice Oray, has consequently announced that all owners of the apps should pay VAT on downloads, besides other taxes under Section 3 of the Income Tax Act.
“VAT applies to those apps because you are providing a service which is not zero-rated or exempted,’’ he said.
‘‘If you are a resident here, you are supposed to pay the taxes the normal way. If you are not a resident but you have an app that’s being used here, your tax representative (a requirement under Section 16 of Tax Procedures Act) must pay your VAT and income tax,”
To Enforce This New Tax Regime, KRA Is Planning To Mine Data From The Communication Authority of Kenya
In this regard, Kenyan Revenue Authority revenue authority further revealed that it would be working closely with the Communication Authority of Kenya to ensure they get accurate data to enforce the new tax regime.
By doing so, they would have access to transaction data by resident and foreign-based app developers doing business in Kenya.
A Look At The Kenyan Tax Regime
In Kenya, firms that generate more than Ksh5 million in annual sales are required to register for VAT obligations for supplies, in addition to a corporate tax set at 30 per cent for resident companies and 37.5 per cent for foreign entities.
Those generating a maximum annual turnover of less than Ksh5 million, are not required to register for VAT, but pay a presumptive tax at the rate of 15 per cent of the annual single business permit fee issued by a county government.
The taxman will, however, have to wait for the National Assembly to ratify the “Multilateral Convention on Mutual Administrative Assistance in Tax Matters”, a treaty that enables it to exchange and get specific data on tax evaders across the world.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
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