The Treasury through the Finance Act, 2020 amended the Income Tax Act, Cap 470 (“Income Tax Act”) by introducing the Digital Service Tax (“DST”). Subsequently, the Income Tax (Digital Service Tax) Regulations (“Regulations”), 2020 were enacted to give effect to the Income Tax Act provisions on DST. DST took effect on 1st January 2021.
The application of DST
The DST applies to digital service providers who are in the digital marketplace. The Finance Act, 2021(“Finance Act) amended the definition of a digital market place in the Income Tax Act to an online platform that enables users to sell or provide services, goods or other property to other users.
As such, DST is payable on income accrued in Kenya from services offered through a digital marketplace. The DST levy is at 1.5 per cent of the gross transaction value and is due at the time of transfer of the payment to the service provider.
It is payable by persons whose income is accrued in Kenya through a digital marketplace provided that they are a resident or non-resident person with a permanent establishment in Kenya.
The Finance Act amended the applicability of DST by extending it to non-residents. Consequently, a non-resident person who provides services to a user who is located in Kenya is subject to DST. It however does not apply to income subject to Withholding Tax or income from provision of radio, television or internet services.
Procedure for registration of DST
Regulation 7 of the Regulations provides that a service provider with a permanent establishment in Kenya will be required to apply to the Commissioner of Tax for digital service tax registration in the prescribed form.
A non-resident person without a permanent establishment in Kenya who provides a digital service to a user in Kenya may register through a registration form via the iTax platform. On registration, a digital service provider is issued with a Personal Identification Number for filing returns and payment of the digital service tax.
The due date for DST
DST is payable before the twentieth (20th) day after the end of the month when the service was offered.
Conclusion
Different technology platforms are complying with DST by implementing the digital tax measures as more foreign platforms change their price ranges in compliance and fulfilment of payment of DST.
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