Taxman eyes digital space as ICT sector gets Sh15b allocation

Wednesday, June 17th, 2020 00:00 | By
Times Towers, the Kenya Revenue Authority headquarters along Haile Selassie Avenue in Nairobi. Photo/PD/FILE

ECONOMY:  As coronavirus (Covid-19) pandemic continues to bite hard on the global economies across the world, various individuals and companies are now shifting to digital space for survival.

Kenya has not been left behind in the shift to digital space which is also happening when working from home, due to social distancing requirement, is fast becoming part of the new normal. 

This shift to digital has, however, put various celebrities including event organisers, influential media personalities, emcees and artists in the music and comedy industries who have found themselves in a tricky situation.

After the imposition of a ban on social gatherings, a number of these players have increasingly drifted to the new media to entertain their audience and keep their businesses afloat. 

But now the government is seeking to cash in on the fast-growing digital sector at the height of Covid-19, by imposing a 1.5 per cent digital service tax on the value of online or digital transactions.

While highlighting the budget policy and revenue raising measures for fiscal year 2020/21 budget, National Treasury Cabinet Secretary Ukur Yatani said with the fast advancement in technology, many business transactions are increasingly being carried out through digital platforms.

Yatani has proposed Sh14.9 billion to fund projects under the Information Communication Technology (ICT) sector for the 2020/2021 financial year.

Electronic services

The existing position in Kenya requires non-residents to register and charge valued added tax (VAT) for electronic services supplied to persons who are not registered for VAT in the country.

Electronic services include webhosting services, remote maintenance of programmes and equipment, software and updating of software and access to databases.

Others are self-education packages, music, films or games and political, cultural, artistic, sporting, scientific and other broadcasts and events including broadcast television provided or delivered on or through a telecommunications network.

This means that the Finance Act, 2019  which introduced provisions subjecting income earned or accrued via a digital market place to income tax and VAT will have to be amended. 

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