The Kenya Revenue Authority (KRA) has expanded its tax compliance efforts to include income generated from digital applications used within Kenya, aiming to meet a Ksh6.1 trillion ($61 billion) revenue target through June 2021.
Under the Value Added Tax (VAT) Act 2013, app developers must collect 16% VAT on platform downloads and associated revenues. The KRA plans to partner with the Communications Authority of Kenya (CA) to access transaction data from both local and international developers operating in the country.
Deputy Commissioner for Corporate Policy Maurice Oray stated that app provision constitutes a taxable service, requiring compliance with Section 3 of the Income Tax Act. Residents must pay taxes through standard channels, while non-residents must appoint tax representatives under Section 16 of the Tax Procedures Act.
Firms generating over Ksh5 million ($50,000) annually must register for VAT and pay corporate tax at 30% for local entities or 37.5% for foreign firms. Smaller operations with turnover below Ksh5 million face a 15% presumptive tax, though this could shift to a 3% monthly turnover levy under the 2019 Finance Bill.
Individual income tax rates range from 10% on earnings up to Ksh147,580 ($1,400) to 30% for income exceeding Ksh564,709 ($5,600). Oray emphasized self-assessment but warned of penalties for unreported revenue.
KRA awaits ratification of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to enhance cross-border data sharing. The authority claims advanced technological systems monitor transactions, though digital businesses often lack physical presence in jurisdictions where they operate.
This initiative aligns with global efforts to tax the digital economy. Uganda imposed a daily social media tax in July 2018, while France approved a 3% tax on revenue from major tech firms operating within its borders in 2019.
