I have come across this thread on Twitter. Thought the digital (E-Commerce) tax is 1.5% but it seems the devil is in the details. Those that have read the entire draft claim that it’s 14%. So, expect soon to pay 14% tax on all your ecommerce transactions. Netflix, Uber, Amazon, Alibaba, and all your online transactions where you swipe your card or use your MPESA like on Alibaba. What are your views on this?
They are two separate taxes.
VAT which was was introduced last year, however the finance bill 2019 passed late in November due to political issues and it is only now that the regulations are being drafted. It may come in force soon after the regulations are finalised and gazetted. VAT rate is currently 14% but may go back to 16% after Corvid has passed.
Whether it is fair or not hapo sijui, what I know is that Netflix et al. pay VAT/GST to governments all over the world. UK - 20%, Japan - 8%, South Korea -10% , Australia - 10%, The EU collects a netflix tax on behalf of members etc. It’s not something new to global players who will just pass it on to consumers. As always it’s subject to the 80/20 rule. 80% of the suppliers will probably not comply but the 20% who do are the large players who cannot simply hide and avoid it and they will raise 80% of the Digital VAT collected.
Digital Service Tax of 1.5% that has been introduced in the Budget Statement for 2020. This still has a ways to go before it goes through the whole parliamentary process and regulation making process. It’s still not clear exactly what it applies to at this stage.
Your explanation is perfect. Thought may be ni kitu wanaeza amua ku enforce on the side of consumers such that you’re taxed before that purchase is affected when using ecommerce.
Maybe you didn’t catch it. Digital market players will pass the tax straight through to you the consumer.
For demonstration purpose lets say Netflix price is Ksh 1000 a month. They’ll charge 14% VAT = Ksh 140. They’ll add that to the price so the new price will be Ksh 1,140.
So Netflix collects 1,140 from your card, gets to keep its 1000bob, passes the govt a fresh new 140bob and you also get to enjoy the feeling of being a good taxpayer. Win, Win, Win!
Netflix can choose to absorb some of the cost of the tax as they have done in other markets though for the lower tier subscription.
Also I know netflix keeps coming up as an example but this will apply to everyone even locally. Jumia, nation epaper, mydawa, e.t.c They will probably just pass through the tax to you the consumer.
Won’t that result to double taxation? For example, the goods we buy in these stores are VAT inclusive already.
Or in that case, only the 1.5% Digital Tax applies?
"The Finance Bill proposes to amend the Income Tax Act in order to:
- introduce a digital services tax payable at the time of the transfer of the payment for the service to the service provider at the rate of 1.5% of the gross transaction value. The tax will be chargeable on income from digital services accrued in or derived from Kenya through a digital market place. In respect of a resident person or a non-resident person with a permanent establishment in Kenya, the tax will represent an advance tax; and
- empower the Commissioner of Income Taxes at the Kenya Revenue Authority to appoint agents for the purpose of collection and remittance of the digital services tax.
These provisions only address income tax with no similar amendments currently proposed for VAT."
All the above is explained here
Thanks man. This now puts the issue to rest
Hapo I think I made some wrong examples coz the added VAT should be on digital services like epapers, vod, streaming e.t.c and not on physical goods which will probably already have VAT.
The proposed Digital Services Tax regulations are up for public participation. You can find them here.