Digital tax in Kenya is one of the tax systems used by the government in an attempt to increase tax revenue in the country. It is not only Kenya that levies this tax system. Even within the East African Community, other countries are also levying the tax
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It is essential for anyone who transacts business with Kenya tax residents to know specific facts about the taxing method. The persons are expected to pay the tax for accruing or deriving income from Kenya, and Kenya tax residents are expected to collect the tax.
Failure to follow the tax law on Digital Service Tax has consequences.
Twenty Six Facts About Digital Tax In Kenya
The following are twenty-six facts about Digital Tax in Kenya.
- Digital Service Tax is not a new tax but a method of levying income tax.
- The tax is levied on business transactions conducted over electronic networks or the internet.
3. The transactions are between Kenya tax residents and non-tax residents.
4. Levying of Digital Service Tax in Kenya became effective from January 1, 2021.
5. From 1st July 2021, Digital Service Tax is only applicable to tax non-residents.
Source: Pixabay
6. Kenya tax residents are exempted from Digital Service effective 1st July 2021.
7. The Income Tax Act defines income tax residency in Kenya.
8. The tax is payable on income accrued or derived from Kenya.
9. This is from businesses transactions over electronic networks or the internet.
10. This includes services that are offered through a digital marketplace.
11. For purposes of the tax in Kenya, the digital marketplace is defined.
12. It is any platform that enables direct interaction between sellers and buyers of services and goods by electronic means.
13. All persons who procure services subject to the tax in Kenya are expected to get personal identification numbers.
14. The term person is used for natural and legal persons, for example, a corporate entity.
15. Not all income accrued or derived over electronic networks or the internet is subject to the tax.
16. The following transactions are exempted from the tax.
a. Online services provided by Government institutions.
b. Services listed in the Fourth Schedule of the Income Tax Act are purchased to facilitate lending, borrowing, deposits, etc., by financial or banks.
c. Financial institutions or banks registered or licensed that provide services that facilitate lending, borrowing, deposits, etc.
d. Services provided by non-resident persons who are in the business of transmitting messages, optical fibre, internet satellite, radio, cable, television broadcasting, or other methods of communication.
e. Income that is subject to Withholding Income Tax in Kenya.
Frankfurt River I Source: Pixabay
17. From 1st January 2021, the tax was levied on a cash basis; that is, the tax was due on payment of the service.
18. Currently, from 1st January 2022, the tax point for Digital Service Tax is on an accrual basis that is upon recognizing the supply payment as a debt.
19. The tax rate for the tax is one percent of the gross transaction value, which does not include Value Added Tax.
20. The tax period for the tax is one calendar month.
21. The due date for the tax is before the twentieth day of the following month, similar to Value Added Tax, Withholding Income Tax, etc.
22. Digital Service Tax is paid like any other tax by generating a payment registration number with all the details and then choosing how to make the payments.
23. Digital Service Tax is a final tax with no further declarations made at the end of the year.
24. There are no annual tax returns for Digital Service Tax.
25. The tax penalties for Digital Service Tax are those applicable to any other income tax.
26. The tax interest for Digital Service Tax is similar to that applicable to any other income tax.
These are twenty-six facts about Digital Service Tax in Kenya. These are not the only facts. There are many other facts.
This post was on twenty-six facts about Digital Tax in Kenya.
We trust you have learnt something.
Thank you for reading the post.
Dr. Wakaguyu wa-Kiburi
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