KRA Seeks to Collect KSh 5 Billion in Digital Taxes within Six Months

The Kenya Revenue Authority (KRA) is looking to collect Sh 5 billion in taxes from digital transactions within the next six months.

Commissioner general Githii Mburu, revealed that KRA would collect taxes from local and foreign businesses supplying variety of online services in Kenya.

“We are looking at collecting Sh5 billion between January and June from the digital economy. We have grown revenue in that sector significantly.”

Firms operating online are expected to pay tax at a flat rate of 1.5 percent on the value of goods or services supplied or sold online. The Digital Service Tax, 2020 is classified under the Income Tax bracket and takes effect in January 2021.

“We intend to use transaction tracers through data-driven detection in taxing multinationals as we roll out taxes on digital businesses,” Deputy Commissioner in charge of policy and domestic taxes, Caxton Masudi said in June.

The taxes were introduced through the 2020 Finance Act with an aim of tapping the fast growing technology sector and widen the taxman’s base.

Foreign businesses are expected to submit their details for registration purposes as per the regulation. The details include: website addresses, the national tax identification number issued to their supplier, certificate of incorporation, postal address and name of the individual managing the suppliers’ tax affairs.

Most of the targeted companies operate without a physical address in Kenya but command a large presence in the digital market. These include companies such as Google and Netflix.

The taxable digital content includes downloadable products such as mobile applications, movies and subscription-based media, e-books, journals, magazines, new, streaming of TV shows, streaming of music, podcasts, and online gaming.

Failure to comply with the electronic tax requirement will cost the business a cash penalty that is double the required amount or Sh100,000 fine.