President Kenyatta has approved the Finance Bill 2020. The bill had proposed amendments to multiple statutes, including The Income Tax Act, The Value Added Tax Act, 2013, The Excise Duty Act, 2015 and The Tax Procedures Act, 2015.
Perhaps the most important aspect of the bill is the introduction of the digital services tax. The law will now see the introduction of digital tax at 1.5% of the gross transaction value. To this end, the tax will be payable by people whose income from the provision of services and products is sourced in the state through the digital marketplace.
What’s more, the digital service tax will be payable at the time of transfer of payment to service providers.
The law further states that in the case of Kenyans or non-residents with permanent establishments in the state, the tax will be available for offset against their income liability for that year.
The tax will be effective from Jan 2021.
We looked into the proposal a few weeks ago, and made some notable observations and inferences. You can find out more from this story. But in summary, the law has introduced changes in the withholding tax regime, and will task digital businesses that are even making losses to remit taxes based on their sales.