In Kenya, Facebook has implemented taxes that will take effect on April 1, 2021. Under the new tax regime, if an advertising company targets Kenya as its “Sold To” country and has not verified that it is advertising for business purposes, the company will be subject to an additional 16% VAT on their advertising services purchased after April 1, 2021. 

“Due to implementation of a value-added tax (VAT) in Kenya, Facebook is required to charge VAT on the sale of ads to advertisers that are not advertising for business purposes in Kenya,” it explained in a statement.

“All advertisers with a business country of Kenya who have not confirmed they are advertising for business purposes will be charged an additional 16% VAT on advertising services purchased after 1 April 2021.”

Here Is What You Need To Know

• Facebook stated that not everyone who has a Facebook account will be eligible for a tax deduction, but only those who meet the requirements will be.

• Facebook said in the Ad Accounts Settings of Ads Manager, “You can check the box to confirm whether or not you’re advertising for business purposes and responsible for self-assessing and paying VAT in compliance with the Tax Code of Kenya,”

• Facebook says it “doesn’t apply VAT to your purchase of Facebook ads” if you confirm you’re advertising for business purposes.

• If you are not buying Facebook ads for business purposes, Facebook has added the VAT will be added whenever you are paying for your ads.

“Because VAT is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold amount. If you pay for Facebook ads with a manual payment method, VAT is accounted for and applied at the applicable local rate when your ad account is funded to determine the total balance available,” Facebook said. 

Read also: Digital Tax Regime Starts In Kenya. Here Is What Your Startup Should Know

The New Era Of Digital Service Tax In Kenya

• With effect from January 1, 2021, all digital marketplaces operating in Kenya are now be required to pay a 1.5% digital service tax after the Finance Act 2020 amendment of the Income Tax Act of Kenya was passed into law.

• The new 1.5% ‘Digital Service Tax’ (DST) imposed on the gross transaction value of services is due at the time of payment.

• Additionally, under Kenya’s new 2020 Value Added Tax (Digital Market Supply) Regulations, digital marketplaces (ecommerce websites) that fail to pay Value Added Tax (at 14%) pursuant Section 5(8) of the country’s Value Added Tax Act, 2013 shall, in addition to the penalties prescribed under the law, be liable to restriction of access to their websites in Kenya until such tax is paid.

• With these regulations, Kenyan Revenue Authority (KRA) is targeting ecommerce platforms with taxes to fund the Sh3 trillion ($28 billion) 2020/2021 budget.

“A digital marketplace supplier from an export country who is required to register under the simplified VAT registration framework shall apply to the Commissioner for registration within thirty days from the publication of these regulations,” the regulation reads in part.

• Under the regulation, any person offering taxable services through a digital marketplace (ecommerce) shall be required to register for tax in Kenya.

• The new tax now means that if, for instance, you are are taking an Uber and the cost of the trip is KES 100, the digital service tax is KES 1.5. If the fee is KES 200, the tax is KES 3.

• The Kenya Revenue Authority (KRA), in charge of implementing and enforcing taxes in Kenya, has said it has created a special unit to track transactions and tax multi-nationsl using data-driven detection.

• One will be subject to DST if one provides or facilitates provision of a service to a user who is located in Kenya.

• Facebook has joined YouTube in deducting taxes for the US government from all outlets, including those run by producers who do not live in the US.

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 writer