KRA to Collect Ksh 5B Digital tax by June 2021

Kenya Revenue Authority (KRA) estimates to collect Ksh. 5 billion from the digital economy in both local and foreign firms by the end of June 2021.

The collections are as a result of the Finance Act 2020 which introduced a 1.5% digital service tax for every online transaction, sale, and services which is to kick off from January 2021.

“Should we have the impression that they are not paying the right amount of taxes, we have devised mechanisms of obtaining independent information; We will go through the Mastercards and Visas, we will work with the Communication Authority of Kenya (CAK) and Central Bank of Kenya among other banks in order for us to get the information on the transactions,” said Commissioner general Githii Mburu.

The taxman had set a special unit to track digital revenues by the end of June 2020.

The COVID 19 pandemic affected the economy, changing the KRA’s estimated tax revenue from Ksh. 1.51T to Ksh.1.48T. Thus, the taxman is seeking to minimize the gap by collecting digital revenues.

The digital revenue applies to all online mobile applications, movies, and e-books as well as subscription-based media which includes journals, news, magazines, online gaming, streaming of TV shows, podcasts, and music.

Additionally, suppliers of distance teaching through e-learning or pre-recorded mediums of digital content will be expected to pay digital tax.

Firms that sell tickets for live events are also not exempted.

The taxman intends “to use transaction tracers through data-driven detection in taxing multinationals as we roll out taxes on digital businesses,” says Deputy Commissioner Policy and Domestic taxes, Caxton Masudi.

Treasury Cabinet Secretary Ukur Yatani who imposed the 1.5% levy, however admits that it will be difficult to effectively tax some of the transactions carried on a digital platform. Despite this, he says it will provide a working framework for digital Kenya.