INTRODUCTION OF DIGITAL SERVICE TAX (DST) @ 1.5%

Digital Service tax

On 30th June 2020, President Uhuru Kenyatta approved the Finance Act, 2020.  The Act introduced a Digital Service Tax at a rate of 1.5% of the gross transaction value and shall be payable by a person whose income from services is derived from or accrues in Kenya through a digital market place. Technology firms using the internet to market and sell products will pay a tax at the rate of 1.5% of the gross value of transactions.

The tax shall be due at the time of the transfer of the payment for the service to the service provider. Residents and non-residents with a permanent establishment will be entitled to offset the digital tax paid against their income tax payable for that year of income.

The proposed regulation has provided the following definitions under the Income Tax Act, Cap 470;

  1. Digital marketplace provider – means a person who provides a platform that enables the direct interaction between buyers and sellers through a digital marketplace, website or other online applications;
  2. Digital service – means any service that is delivered or subscribed over the internet or other electronic network where the delivery of the service is essentially automated;
  3. Digital service provider – means a person who provides digital services through a digital marketplace.

 

 

Disclaimer

The Amendment of the Finance Act Tax article on VAT Input Tax is written in general terms for guidance only and are not substitute for professional advice or the Law. Whilst every care has been exercised in ensuring the accuracy of information contained herein, we will not accept any responsibility for errors or omissions or for any action taken, or refraining from action without appropriate professional advice’

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