This archive report was first published on 8 June 2020.
Kenya's Parliament is set to introduce a digital service tax on global online firms generating cash in the country's cyberspace, with the Finance Bill, 2020, proposing a six-month timeline for implementation.
According to the Bill, which is set to be debated on Tuesday, June 9, 2020, both foreign and local entities that derive income in Kenya through a digital marketplace will be required to pay the tax.
The proposed law establishes a digital service tax payable by firms that provide services through a digital marketplace, with the taxman stipulating that payment made under the new tax shall be due at the time of the transfer for the service to the providers.
The introduction of such a tax is set to put Kenya on a collision path with multinationals like American technology giant Google, which had warned against imposition of tax on digital transactions in August 2019.
The multinational had argued that the amendments proposed by the government were contrary to the international tax system, which requires companies to pay the bulk of their corporate tax in the countries where their products and services are created, as opposed to where they are consumed.
However, the taxman is fast tightening the noose on e-commerce firms, with the Kenya Revenue Authority publishing a draft 2020 Value Added Tax (Digital Market Supply) Regulation last week.
The regulation proposes to tax downloadable digital contents, subscription-based media, software, data management, and supply of music, film, and games, among other services.
