The government of Kenya has been trying to explore as many avenues as possible to maximize its tax collections. Over the last couple of years, a lot of changes have been made to tax laws in the form of Parliament Acts. Some of these changes and developments, most of which are in the form of amendments to Finance laws, have seen Kenyans dig deeper into their pockets to furnish their tax obligations. It should be remembered that some of the proposals have focused on tapping revenue from internet-based/digital services, which have become quite lucrative for businesses running them.
For instance, the state introduced the digital service tax, DST, which meant that the gross transaction value of digital services would be subject to a 1.5 percent digital tax. It went into effect in January 2021 and was payable by people getting income from the provision of services and products through the digital marketplace. The state did not stop there: according to the Finance Act, of 2022, the rate of the digital service tax increased from 1.5 percent to 3 percent.
Earlier on, an amendment to the same law proposed a 10 percent additional tax (excise duty) on the importation of phones. There was also an additional excise duty of KES 50 for every imported SIM card.
That aside, Meta, the mother company of Facebook, Meta, Instagram, Messenger, and Oculus has sent a notification to its Kenyan users on Facebook that starting this month (November 2022), they will be subject to VAT at the applicable local tax rate ads. In the Kenya context, this is 16 percent VAT on top of the funds that advertisers pay for their ads on the social media platform.
“Beginning November 2022, Meta ads in Kenya are subject to a value-added tax (VAT) at the applicable local rate. This applies to all advertisers whose ‘Sold To’ country on their business or personal address is set to Kenya,” says Meta in a statement.
First of all, you need to add your VAT ID to the payment settings of your page.
If you are registered for VAT and provide your VAT ID, your VAT ID will then show up on your ad receipts.
Meta clarifies that in case you are entitled to recover VAT, this may help you recover any VAT you paid to the Kenyan tax authorities if you are a VAT-registered business in Kenya.
Furthermore, VAT is added whenever you are charged for your ads regardless of whether you are purchasing Meta Ads for business or personal purposes.
“Because VAT is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold amount,” Meta clarified further.
Meta concludes that if you pay for ads with a manual receipt method, VAT is accounted for and applied at the applicable local rate when your ad account is funded to determine the total balance available.