[kictanet] Kenya:- Kenya Finance Bill 2019:- Taxation of digital economy

[Ephraim Percy Kenyanito]

*Kenya:-* Kenya Finance Bill 2019:- Taxation of digital economy

In order to tap into the fast growing digital economy, the Bill proposes
to tax income accruing through a digital marketplace by introducing a
new charging section.

Although this is a welcome move to increase the tax base, it is still
not clear how international digital platforms with no physical presence
in Kenya will be taxed. In this regard, it is expected that special
rules may soon be formulated detailing the operational mechanics of how
taxation of the digital economy will be undertaken. (It can be found
here:-
http://www.parliament.go.ke/sites/default/files/2019-07/Finance%20Bill%2C%202019_compressed.pdf)

Below are the relevant portions of the proposed laws:

  *

    Section 3: Section 3 of the Income Tax Act is proposed to be amended
    by inserting the words highlighted:

      o

        (1). Subject to, and in accordance with this act, a tax to be
        known as income tax shall be charged each year of income upon
        all the income of a person, whetherresident or non-resident,
        which accrued in or was derived from Kenya

      o

        (2). Subject to this Act, income upon which tax is chargeable
        under this Act is income in respect of

          +

            A. Gains or profits from:

              #

                Any business, for whatever period of time carried on;

              #

                Any employment or services rendered;

              #

                Any right granted to any other person for use or
                occupation of property;

          +

            B. Dividends or interest

          +

            C. a pension, charge or annuity; ii. Any withdrawals from,
            or payments out of, a registered pension fund or a
            registered provident fund or a registered individual
            retirement fund; and (iii) any withdrawals from a registered
            home ownership savings plan

          +

            D.income chargeable to tax includes income accruing through
            a digital marketplace

          +

            e. ‘Digital marketplace’ means a platform that enables the
            direct interaction between buyers and sellers of goods and
            services through electronic means

          +

            E. AN amount deemed to be the income of any person under
            this Act or by rules made under this Act;

          +

            F. Gains accruing in the circumstances prescribed in, and
            computed in accordance with, the Eight Schedule

          +

            G. Subject to section 15(5A), the net gain derived on the
            disposal of an interest in a person, if the  interest
            derives twenty per cent or more of its value, directly or
            indirectly, from immovable property in Kenya; and

          +

            H. A natural resource income

  *

    Section 5 of the Value Added Tax Act, 2013  is proposed to be
    amended by inserting the words highlighted

      o

        1. A tax, to be known as the value added tax, shall be charged
        in accordance with the provisions of this Act on - 

          +

            (a). A taxable supply made by a registered person in Kenya

          +

            b. The importation of taxable goods; and

          +

            c. The supply of taxable services

      o

        2. The rate of tax shall be:

          +

            A. in the case of zero-rated supply, 0% or

          +

            In the case of goods listed in section B of the first
            schedule 8%

          +

            In any other case, 16% of the taxable value of the taxable
            supply, the value of imported taxable goods or the value of
            a supply of imported taxable services.

      o

        ...7. The provisions of subsection (1) shall be applicable to
        supplies made through a digital marketplace

      o

        8. For the purposes of this section, a ‘digital marketplace’
        means a platform that enables the direct interaction between
        buyers and sellers of goods and services through electronic means

-- 

Best Regards,
Ephraim Percy Kenyanito
Digital Program Officer

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