Kenya plans to double the digital service tax (DST) to three% starting July this 12 months, as the federal government faucets the rising on-line economic system to extend its home revenues.
It’s anticipated that the brand new charges, proposed within the Finance Invoice by the nation’s Treasury division, will doubtless be handed by the lawmakers. The rise comes barely over a 12 months after the DST got here into impact in Kenya, affecting tech corporations reminiscent of Amazon, Uber, Spotify and Netflix.
“The Third Schedule to the Revenue Tax Act is amended… by deleting the expression ‘one-point-five p.c’ showing in paragraph 12 (digital service tax charge) and substituting subsequently the expression ‘three p.c’,” Kenya’s Treasury cupboard secretary Ukur Yatani wrote within the Finance Invoice 2022.
The DST is a tax on gross transaction values by tech corporations inside a selected nation. In Kenya, East Africa’s largest economic system, corporations or people (non-residents) are obliged to pay it in the event that they “present or facilitate provision of a service to a person who’s positioned in Kenya.”
The taxable companies, as per the nation’s income authority, embrace over-the-top companies like video-streaming and podcasts, subscription-based media together with information, digital marketplaces, and downloadable digital content material like e-books and movies.
Others embrace digital knowledge administration companies, digital ticket reserving, on-line distance studying and the sale, and licensing or monetization of any knowledge collected about Kenyan customers generated from locations like digital marketplaces. Abroad corporations with out workplaces in Kenya are required to register electronically or appoint a tax consultant within the nation to file the returns and make funds.
The uptake of DSTs was stated to have been accelerated by the Covid pandemic and efforts by the Paris-based Group of Financial Co-operation and Improvement (OECD) to make sure that nations elevated taxing rights over the revenues of multinationals with operations of their nations.
In a tax deal brokered final 12 months, out of the 140 OECD members, solely 4 – together with Kenya (which had already applied DST) and Nigeria – abstained from an settlement that set a 15% minimal company tax charge for multinational enterprises.
OECD stated that the transfer will make sure that these multinationals pay a justifiable share of taxes in nations the place they’ve operations.