KRA Gazettes Digital Service Tax Regulations

Corporate Taxes: Why Loss-making Businesses Will Be taxed 1 percent of Turnover

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Kenya Revenue Authority (KRA) has gazetted the Income Tax (Digital Service Tax) Regulations, 2020 that will govern collecting of tax from online firms and services accrued from online.

Kenya’s Digital Service Tax will come into force on the 2nd of January 2021.

According to the regulations, the digital service tax shall be imposed on the gross transaction value of the service. Kenya currently has a 1.5 per cent digital tax policy on the value of online transactions, as provided in its Finance Bill 2020.

Digital services which digital service tax shall be applicable include Downloadable digital content including downloading of mobile applications, e-books, and movies; Subscription-based media including news, magazines, journals, streaming of TV shows and music, podcasts and online gaming.

Software programs including downloading of software, drivers, website filters, and firewalls.

Electronic data management including website hosting, online data warehousing, file-sharing, and cloud storage services.  Supply of music, films, and games.

Supply of search-engine and automated helpdesk services including supply of customized search-engine services.

Tickets bought for live events, theaters, restaurants purchased through the internet.

Supply of distance teaching via pre-recorded medium or e-learning including the supply of online courses and training.  Supply of digital content for listening, viewing, or playing on any audio, visual or digital media.

However, services that shall be exempt from the digital tax include online services that facilitate payments, lending, or trading of financial instruments, commodities, or foreign exchange, carried out by a licensed financial institution or financial services provider.

Online services provided by Government institutions will also be exempted.

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