What is a Digital Market Place?

A digital marketplace is a platform that enables direct interaction between buyers and sellers of goods and services through electronic means.

What other tax obligations apply on digital marketplace apart from the ordinary tax regimes?

In addition to the tax obligations that are applicable in the Kenyan Tax laws, the following tax obligations apply:

  1. Digital Service Tax.
  2. VAT on digital supplies.

What is Digital Service Tax (DST)?

Digital Service Tax (DST) is payable on income derived or accrued in Kenya from services offered through a digital marketplace.

What is the rate of DST?

1.5% of the gross transaction value:

  1. a) In the case of the provision of digital services, the payment received as consideration for the services; and
  2. b) In the case of a digital marketplace, the commission or fee paid to the digital marketplace provider for the use of the platform

Note: The gross transaction value is exclusive of VAT.

When is the Effective date for DST?

From 1st January 2021.

Who pays DST?

Resident and Non – Resident:

  1. Digital service providers
  2. Digital market place providers, or
  3. Their appointed tax representatives (in the case of non-residents digital service providers or digital marketplace providers without a permanent establishment in Kenya).

Will DST apply in the case of Business to Business (B2B) transactions?

Yes. DST will be applicable for both B2B & B2C (Business to Consumer) transactions.

When is the due date for DST?

The return and payment with respect to DST is due on or before the 20th day following the end of the month the digital service was offered.

How is the DST Simplified tax registration done?

  • Resident digital service providers will be required to file a payment return on iTax on or before the 20th of February 2021.

How does one determine whether the digital services have been provided in Kenya?

A digital service provider shall be subject to digital service tax if they provide or facilitate provision of a service to a user who is located in Kenya.

How does one determine that the user is located in Kenya?

If any of the following parameters are met: -­

  1. Payment proxy: Payment for the digital services is made using a credit or debit facility provided by any financial institution or company in Kenya.
  2. Terminal Proxy: The user accesses the digital interface from a terminal (computer, tablet or mobile phone) located in Kenya.
  3. Internet proxy: The supplies or digital services are acquired using an internet protocol address registered in Kenya or an international mobile phone country code assigned to Kenya.
  4. Location proxy: The user has a business, residential or billing address in Kenya.

Under the DST Regulations, what is the scope of taxable services?

  • downloadable digital content including downloadable mobile applications, e-books and films;
  • over-the-top services including streaming television shows, films, music, podcasts and any form of digital content;
  • sale of, licensing of, or any other form of monetising data collected about Kenyan users which has been generated from the users’ activities on a digital marketplace;
  • provision of a digital marketplace;
  • subscription-based media including news, magazines and journals;
  • electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;
  • electronic booking or electronic ticketing services including the online sale of tickets;
  • provision of search engine and automated held desk services including supply of customised search engine services;
  • online distance training through pre-recorded media or e-learning including online courses and training; and
  • any other service provided through a digital marketplace.

Does DST apply to those selling goods via digital or social media platforms?

DST is applicable to digital services, thus for goods sold on digital or social media platforms the suppliers are required to declare the income earned under the self-assessment regime provided under the relevant Tax Laws.

Individuals and companies use my website to sell their products, am I liable to Digital Service Tax?

Yes, DST is applicable on the commission of fee charged for the use of the platforms enabling direct interaction between buyers and sellers through a digital marketplace, website, or other online applications.

Which tax head takes preference? DST or Withholding Tax

DST is chargeable on digital services and platforms offering digital services. Regulation 3(2) exempts income taxed under Section 35 of the Income Tax Act.

16) In which currency should the tax payments be made?

The tax due will be paid in Kenyan currency (Kenya shillings) and deposited into the KRA account of the authorized Kenyan banks

What requirements does KRA have in regards to documentation required for Registration by non-resident digital service providers?

The official documentation to be submitted during the online registration process should be in English. In case the documents are in a foreign language, they are required to be translated into certified English copies before upload.

What requirements does KRA have in regards to documentation required for Registration by non-resident digital service providers?

The official documentation to be submitted during the online registration process should be in English. In case the documents are in a foreign language, they are required to be translated into certified English copies before upload.