Netflix rates up on inclusion of VAT tax charge


Subscription video-on-demand service Netflix monthly charges have increased after the company included in its billing a value added tax charge.

Netflix has reviewed its rates to Sh1,100 from Sh950 for the standard package and Sh1,450 from Sh1,200 for the premium package.

The price hikes which take effect from end of May do not affect subscribers under the basic plan currently paying Sh700.

“Starting May 30, a value-added tax (VAT) will be included in your Netflix price,” read the company’s message to a subscriber.

The Digital Service Tax (DST) came into force on January 1 and was introduced to both the Income Tax Act (ITA) and the Value Added Tax Act (VAT).

Both Acts prescribe that DST shall be payable by a person whose income is earned in Kenya from the provision of services through a digital market place.

The VAT (Digital Service Tax) applies to supplies undertaken in the digital marketplace at the standard rate when supplied in Kenya.

Under the Income Tax (Digital Service Tax), all businesses selling services online are expected to pay a flat tax of 1.5 percent on the value of goods supplied and sold online or services offered through digital platforms.

Services and goods that fall under this tax bracket include e-books and movies, music, and games, tickets for live events and theatres, subscription-based media including news, magazines and digital content.

Online video platforms have become a popular alternative for consumption of programming with their adoption fuelled by improved internet access and Covid-19 disruptions that have driven ecommerce

The Kenya Revenue Authority (KRA) is targeting businesses and persons under the new digital taxes selling services and goods online.

The taxman is banking on the Covid-19 disruptions that have accelerated the use of online platforms to sell goods and services and raise Sh5 billion from the sector in the six months to June.

The latest data from the Communications Authority (CA) shows that mobile data subscriptions in Kenya stood at 44.4 million in the second quarter of 2020.

Factors driving this growth include increasing population coverage of 3G and 4G networks, availability of affordable smartphones and data plans. It is also attributed to increased consumption of e-commerce, e-government, social media and other online content.