Kenya goes easy on barring non-tax compliant online businesses
Taxis parked at Uhuru Park in Nairobi on July 22, 2019.
What you need to know:
- The Treasury also relaxed its earlier requirement that digital firms register with the Kenya Revenue Authority within 30 days, instead giving them a six-month window to do so.
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 here.
Kenya has backtracked on a new law that would have barred firms, both foreign and local, from doing business online over non-compliance with tax obligations.
Newly published Digital Market Supply Regulations by Treasury Secretary Ukur Yatani, show that Kenya has dropped its earlier proposal that firms which failed to pay value added tax (VAT) and a 1.5 per cent 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.
Digital firms
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 rules, 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 here.
The rules are supposed to support digital service tax introduced in amendments by the Finance Act, 2020 and is to take effect on January 1.
Some of the taxable are downloadable digital content including mobile apps, e-books and movies, music, and games, tickets for live events and theatres.
This means that companies such as Uber, Taxify, Little, Google and Netflix will be expected to pay the tax for their services
