Value Added Tax (Digital Market Supply) Regulation

KRA is now targeting e-commerce platforms under the draft Value Added Tax (Digital Market Supply) Regulation, to fund the Sh 3 Trillion 2020/2021 budget. Under these new regulations downloadable digital content, subscription-based media, software programmes, electronic data management and supply of music, film and games will be taxed. Others included search engines and automated help desk services, online tickets, e-learning platforms, audio, vision or digital media and transport-hailing platforms. “a person supplying taxable services through a digital marketplace shall be required to register for VAT in Kenya,” the regulation says.
Finance CS Yatani has mooted plans to tax digital platforms such as Whatsapp and Facebook as part of the govt’s effort to meet and fund a budget that is currently facing constraints. Challenges include infrastructure projects under the Big 4 Agenda and reviving an economy battered by the effects of the Covid19 pandemic. “A digital marketplace supply shall be deemed to have been made in Kenya where the recipient of the supply is in Kenya, the payment proxy including credit card information and bank account details of the recipient of the digital supplies is in Kenya; or the residence proxy including the billing or home address or access proxy including internet proxy address, mobile country code of SIM card of the recipient is in Kenya,” it says.
An intermediary who makes a digital marketplace supply on behalf of a person will be held accountable for the VAT on such supplies whether such other person is registered for VAT or not. Commissioner for Domestic Taxes Elizabeth Meyo said in a statement earlier that KRA had “noted” that some digital business owners had failed to charge VAT as required by law.
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