Kenya is reportedly planning to impose double tax on giant tech companies like Amazon, Google, Apple, and Facebook which use the internet to market and sell products.
According to Business Daily, the country’s Treasury has proposed to increase digital tax service (DST) to three percent of the gross value of online transactions in the financial year starting July from the current 1.5 percent through the Finance Bill 2022.
The Kenya Revenue Authority (KRA) has reportedly identified foreign tech firms that generate income in the country through the digital marketplace.
“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five percent’ appearing in paragraph 12 (digital service tax rate) and substituting therefore the expression ‘three percent’,” Treasury Cabinet secretary Ukur Yatani wrote in the Finance Bill 2022.
With the 1.5 percent digital service tax that is currently in place, KRA had targetted to collect Sh13.9-billion ($120.3-million) in three years that would have ended in June 2024, making way for Sh926-billion ($1.6-billion) gross revenue to be generated by foreign firms.
This type of tax is levied on the sale of e-books, movies, music, games, and other digital content and applies to foreign companies, according to Business Daily.
“The exchequer is trying to ensure they get a fair share of the pie because half of the business went online during Covid hence the plan is to increase DST to capture that business that has gone online,” said Philip Muema, a partner at tax and business advisory firm Andersen Kenya.
The KRA initially targeted a share of the revenue made by the resident and non-resident firms which sell products over the internet but it was amended in the Finance Act 2021 to apply to non-resident firms, which will be effective as of July 1, 2021.
“Members who join the statement are obliged to withdraw their unilateral measures such as digital services tax and similar measures imposed on non-resident companies which do not have a physical presence in the market jurisdiction,” Terra Saidimu, KRA Commissioner for Intelligence and Strategic Operations, said in October 2021.
By Zintle Nkohla
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