The National Treasury has proposed Value Added Tax (VAT) on streaming sites in a move that could see popular pay on demand sites such as Netflix, Amazon Prime, Hulu and HBO Max compelled to pay taxes for subscriptions paid for by viewers in Kenya.
In its draft (Digital Marketplace Supply) Regulations, 2020, the Treasury is making good of its quest to seek revenue from eCommerce in what could lead to an increase of subscription prices for Kenyan consumers.
Kenya is following in the footsteps of South Africa which also proposed taxes on electronic services in November 2018, proposals that are difficult to enforce as most of the firms offering the e-services Kenyans consume are not registered for VAT in the country.
The Kenyan Treasury is also proposing taxes on subscription-based media e.g New York Times, Bloomberg& Wall Street Journal, three news organizations that boast of many readers in Kenya.
By the same token, Treasury is also seeking extra cheese from magazines, journals, music firms, podcasts and online gaming.
If the proposal sails through, downloading software programs such as the Adobe Creative suite could also be subject to taxes as envisaged by Treasury while purchase of eTickets has also been lined up for the same fate.
The regulations follow the passing of provisions on taxing the digital market place through the Finance Act, 2019 which granted the Cabinet Secretary of the National Treasury with the role of setting taxing modalities.
KRA defines digital suppliers as service providers either registered for VAT in Kenya, receive payments via credit cards, and bank accounts registered in Kenya or those who supply digital products for billing/ home addresses in Kenya.
Firms that receive payments from a SIM card registered in Kenya will also be subject to taxes.
Treasury also wants intermediaries who supply digital products on behalf of suppliers be required to charge and account for the VAT on such supplies whether such other person is registered for VAT or not.
Blocking
However, one queer aspect of the draft is that the government proposes restricting these firms from the Kenyan market if they fail to comply with the regulations.
“A person who fails to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to restriction of access to the digital marketplace in Kenya until such obligations are fulfilled,” reads the regulations.
Besides that, the government also wants digital suppliers to submit to the commissioner, a record of all the supplies made in Kenya indicating the value of the supplies and VAT deducted, for every tax period.
