Are you operating your business in the digital marketplace? We now have the recently enacted Income tax (Digital Service Tax) Regulations, 2020, which impacts on all those within the digital space.
Digital Service Tax shall apply to the income of a resident or non-resident person, derived from or accrued in Kenya from the provision of services through a digital marketplace.
A person shall be subject to digital service tax if that person provides or facilitates the provision of a digital service to a user who is located in Kenya.
Digital services for which digital service tax shall apply include:
(a) downloadable digital content including downloadable mobile applications, e-books and films;
(b) over-the-top services including streaming television shows, films, music, podcasts and any form of digital content;
(c) sale of, licensing of, or any other form of monetising data collected about Kenyan users which has been generated from the users’ activities on a digital marketplace;
(d) provision of a digital marketplace;
(e) subscription-based media including news, magazines and journals;
(f) electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;
(g) electronic booking or electronic ticketing services including the online sale of tickets;
(h) provision of search engine and automated held desk services including supply of customised search engine services; online distance training through pre-recorded media or e-learning including online courses and training; and
(j) any other service provided through a digital marketplace.
The following services shall not be digital services for the purposes of the Income tax (Digital Service Tax) Regulations, 2020;
(a) online services which facilitate payments, lending or trading of financial instruments, commodities or foreign exchange carried out by;
(i) a financial institution specified under the Fourth Schedule to the Act; or
(ii) a financial service provider authorised or approved by the Central Bank of Kenya; and
(b) online services provided by government institutions.
Digital Service Tax shall be imposed on the gross transaction value of the digital service which shall be:
(a) in the case of the provision of digital services, the payment received as consideration for the services; and
(b) in the case of a digital marketplace, the commission or fee paid to the digital marketplace provider for the use of the platform.
(2) The gross transaction value of a digital service shall not include the value added tax charged for the service.
Take note that the Digital Service Tax remittances must be done by the 20th of the month following the end of the month that the digital service was offered.