The digital marketplace transactions were included in Finance Act 2019 to widen the tax net and capture all businesses, including those without physical presence in Kenya but engaging in e-commerce in the country.
The regulations are meant to support digital service tax introduced through the amendments through the Finance Act, 2020.
The tax is charged at the rate of 1.5 percent on value of goods or services sold online.
Kenya has backtracked on a new law that would have barred companies, both foreign and local, from doing business online for non-compliance with tax obligations.
Newly published Digital Market Supply Regulations by Treasury Cabinet Secretary (CS) Ukur Yatani show that Kenya has dropped its earlier proposal that firms which failed to pay value added tax (VAT) and a 1.5 percent digital service tax be blocked from operating in the country.
In the latest regulations set to take effect on January 1,2021, non-compliant firms and digital suppliers will instead face fines and sanctions under the Tax Procedure Act Kenya which imposes a cash penalty equivalent to double the amount dodged or a Sh100,000 fine for failing to comply with the electronic tax system.
“A person who fails to comply with the provisions of these Regulations shall be liable to the penalties prescribed under the Act or the Tax Procedures Act, 2015,” the Treasury said in a September 25 gazette notice.
The Treasury also relaxed its earlier requirement that digital firms register with the Kenya Revenue Authority(KRA) within 30 days, instead giving them a six-month window to do so.
Under the new regulations, foreign businesses are required to issue details for registration including website and uniform resource locators (URLS), the national tax identification number issued to the supplier, certificate of incorporation, postal address, name of the person handling the tax affairs of the supplier, email address and phone numbers.
The digital marketplace transactions were included in Finance Act 2019 to widen the tax net and capture all businesses, including those without physical presence in Kenya but engaging in e-commerce in the country.
The regulations are meant to support digital service tax introduced through the amendments through the Finance Act, 2020.
The tax is charged at the rate of 1.5 percent on value of goods or services sold online.
Some of the taxable downloadable digital content includes mobile apps, e-books and movies, music, and games, tickets for live events and theatres, subscription-based media including news, magazines and journals and digital content for listening and viewing.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
