Kenya: Digital services tax, first return and payment expected in February 2021
Kenya: Digital services tax
Following the release of digital services tax regulations in December 2020, the first return and first payment of the digital services tax for January 2021 are scheduled to be filed and paid, respectively, by 20 February 2021.
Overview of the digital services tax
The digital services tax was introduced in 2019, and the supplies subject to the tax are those made through a digital marketplace—defined as “a platform that enables direct interaction between buyers and sellers of goods and services through electronic means.”
- The digital services tax rate is 1.5% of the gross transaction value. The gross transaction value is the payment received as consideration for the digital service. In the context of a digital marketplace provider, the transaction value is the commission or fee paid for the use of the platform.
- The digital services tax is payable on certain services, and payable by the digital service provider or any person that collects payments for digital services when transferring payment for the service to the service provider.
- Foreign companies that provide digital marketplace services to consumers in Kenya will be subject to digital services tax.
- The digital services tax will not apply to income derived from Kenya by non-resident persons from the business of transmitting messages by cable, radio, optical fibre, television broadcasting, “very small aperture terminal” (VSAT), internet, satellite or by any other similar method of communication. Similarly, the digital services tax will not apply to income that is subject to withholding tax in Kenya (such as management and professional fees earned through a digital marketplace).
- The digital services tax will be treated as an advance tax for resident or non-resident persons with a permanent establishment in Kenya that provides digital services through a digital marketplace. A non-resident person without a permanent establishment in Kenya may appoint a representative to account for the digital services tax.
Read a January 2021 report [PDF 143 KB] prepared by the KPMG member firm in Kenya
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