Kenya’s KRA Imposes Digital Tax on Digital Marketplaces

Kenya Regulatory Authority (KRA) imposes digital tax of 1.5% to users of digital marketplaces, under new regulations under the Finance Act 2020.

By · Aug 8, 2020 . 4min read

KRA Kenya Revenue Authority

Today, Kenya Revenue Authority (KRA), in a report, declared new regulations under the Finance Act 2020 amendment of the Income Tax Act of Kenya. It enforces the users of digital marketplaces to pay digital tax. 

The users have to pay a 1.5% digital service tax. The new tax will be effective from Jan 1, 2021. Utilizing “data-driven detection,” the KRA will create a special tax unit to track and tax transactions, the report further stated.

The report further explains the effect, and the amount of tax users are liable to pay. It states that “The new tax now means that if, for instance, you are taking an Uber and the cost of the trip is KES 100, the digital service tax is KES 1.5. If the fee is KES 200, the tax is KES 3.”

What is Digital Marketplace

Kenya’s Finance Act broadly defines digital marketplace “as a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.” However, cryptocurrency is remains unidentified in Kenya. However, the report states that cryptocurrency does fall under the ‘digital marketplace’ classification. It further elucidates that since they provide a platform for users and sellers of crypto via electronic means, it fits the digital marketplace’s proposition.

KRA: Tax Implications on Emerging Technologies

The KRA has been pondering on how to tax the emerging technologies such as cryptocurrencies. Central Bank of Kenya has been requested to step in to consider imposing taxation on emerging technologies. The report further explains that KRA has been urging the central bank to identify these assets for wealth collection purposes. Kenya working under regulations under the Finance Act 2020, remains to be witnessed.

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