Local online taxi, food delivery platforms to pay digital tax

Treasury proposed amendments to extend the digital service tax to platforms owned by foreign firms but with a presence in Kenya. 

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Local platforms offering online jobs, rental, food delivery and ride-hailing services will be slapped with a 1.5 percent digital service tax if Parliament approves a proposed revenue-raising proposal by the National Treasury. 

National Treasury Cabinet Secretary Njuguna Ndung’u has in his Finance Bill 2024, proposed amendments to extend the digital service tax to platforms owned by foreign firms but with a presence in Kenya. 

In the changes, the definition of ‘digital marketplace’ is expanded to include electronic platforms that offer services like ride-hailing taxis, changes that will increase the tax burden for ride-hailing firms such as Uber and Bolt, which also pay corporate income tax as they have a presence in Kenya. 

“Section of 3 of the Income Tax is amended in subsection (3), by deleting paragraph (ba) and substituting thereof the following new paragraph— ‘digital marketplace’ means an online or electronic platform which enables a person to sell or provide goods, property or services,” reads part of the Finance Bill. 

Some of the services listed include ride-hailing, food delivery, freelance services, professional services, rental services, and task-based services.

“And any other service that is not exempt from tax under this Act (Income Tax).” 

Residents with online platforms where goods and services are exchanged have been spared from digital service tax, as most of them are expected to pay 30 percent corporation income tax. 

Only foreign firms without a permanent establishment were expected to pay the digital service tax. 

The digital service tax came into effect on January 1, 2021, and is levied on the sale of e-books, movies, music, games, and other digital content. The KRA had projected that it would collect Sh13.9 billion from the levy within three years of application. Other than ride-hailing services, other online services that have recently experienced a boom include food deliveries. 

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