LinkedIn raises charges on VAT introduction

Jobs advertising and social networking platform LinkedIn has increased membership fees and rates that viewers pay to access premium services by up to Sh 1,400 per account in the wake of the 16 percent value-added tax (VAT) on digital transactions.

The American-owned tech firm increased the subscription rates from May 11, setting the stage for higher operating costs for businesses.

Kenya introduced a 16 percent VAT on digital transactions for foreign companies through the Finance Act of 2019 but gave firms a grace period of six months to comply.

“We want to provide you with an important tax update related to Kenya tax that will impact your LinkedIn purchase(s). Kenya has introduced tax at 16 percent on e-Services. In order to comply with these laws and regulations, this tax will be added to your current LinkedIn purchase starting on May 11, 2022,” LinkedIn said in a communique to its members.

“If you add a valid business PIN ID to your profile, LinkedIn will not charge you tax. However, please note, if a valid Kenya tax number has been provided, this will be accepted by LinkedIn as notification of your responsibility to account for VAT under the reverse charge mechanism.”

LinkedIn offers four packages – career, business, sales navigator core, and recruiter lite whose rates range from Sh3,200 to Sh10,719 per account.

Subscription fees for recruiter lite — the most expensive account — rose to Sh10,719 from Sh9,241 followed by the sales navigator account at Sh8,759 from Sh7,551. The fees for a premium business account increased to Sh5,149 from Sh4,439 and the career account rose to Sh3,219 from Sh2,775.

LinkedIn now joins video-on-demand service Netflix, tech giant Google, cloud infrastructure provider Digital Ocean, communications software Muck Rack, and Google Workplace in paying the tax that targets foreign-owned firms not incorporated locally.

Individuals and companies that use Facebook to advertise are also paying the 16 percent VAT as Kenya seeks to collect billions of shillings from e-commerce.

For job seekers and employers alike, LinkedIn provides a valuable service.

Job seekers tap information that helps increase their skills and new ideas as well as getting hired through job openings.

While many features are free, the professional social networking website offers an array of additional tools – at a price.

The price of a premium account varies depending on the services. The paid-for information for those in business includes getting leads that help grow clients, find and hire top talent and insights on the economy and company expansion.

LinkedIn offers a premium service where companies, professionals from different sectors, and job seekers pay up to $119.95 per month (Sh13,934) to access content and place job openings.

The platform is popular with corporates that use it as a key online platform to advertise job openings while recruitment agencies use it to seek potential employers.

It remains unclear why LinkedIn delayed implementing the tax on its services given that all foreign firms were supposed to comply after the expiry of the six-month grace period.

The use of online platforms received a major boost two years ago as firms and individuals turned to remote working and interaction platforms to curb the spread of the coronavirus disease after Kenya reported the first positive infection in March 2020.

Increased uptake of 3G and 4G networks, availability of affordable smartphones, and data plans have further boosted e-commerce, e-government, social media, and other online content, offering the Kenya Revenue Authority (KRA) an increased base to raise more revenues.

Kenya has in recent years stepped up efforts to tax foreign firms not incorporated but enjoy a vast market in the country on the back of fast-growing online-based businesses.

The 16 percent VAT is the second tax that Kenya charges for online-based services and products as it seeks to collect billions of shilling from e-commerce.

The country introduced a digital service tax charged at the rate of the gross transaction value. The tax is levied on the sale of e-books, movies, music, games, and other digital content.

Software programmes, including drivers, firewalls, and website filters, are also targeted under the two taxes.

The KRA projects the value of digital transactions by firms not incorporated in Kenya at Sh226.67 billion, highlighting the significance of e-commerce to the country’s revenue-raising plans.

jmutua@ke.nationmedia.com