The Kenya Revenue Authority (KRA) has invited members of the public to comment on the proposed 1.5pc Digital Tax. The public has until August 24 to submit their comments to the Commissioner-General for review.
What is Digital Tax?
Starting January 1st 2021, individuals and businesses that derive income from services offered through a digital market place will be required by law to pay a 1.5pc tax on the gross value of the transaction. The new digital tax will require online businesses to charge and account for Value Added Tax for sales on their e-commerce platforms.
The new model is the taxman’s attempt to expand its tax base, and thus rake in more tax revenue. According to the Commissioner of Domestic Taxes at KRA, “the digital service tax is intended to address the change in transactional models as well as expand the tax base.”
The tax will also require online businesses that do not have a presence in Kenya to employ local tax representatives who will remit their tax obligations.
Businesses that make losses will also be required to pay taxes after the introduction of a Minimum Tax. The charge, in line with the Finance Act of 2020, requires all incorporated companies to pay 1pc tax on gross turnover.
KRA has also introduced an Import Declaration Fee, charging goods worth over Sh10,000 imported under the EAC Duty Remission Scheme a 1.5pc tax on customs value. IDF also removes exemptions on goods worth over Sh200 million earlier exempted on the grounds of public interest.
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