Across the world, various governments have implemented a Digital Service Tax (DST) while several others have proposed or shown intentions to adopt the tax.
As of October 14, Austria, France, Hungary, Italy, Poland, Spain, Turkey, and the United Kingdom were at various stages of implementing DST (Source: What European OECD Countries Are Doing about Digital Services Taxes, Tax Foundation, https://taxfoundation.org/digital-tax-europe-2020/. In Africa, only Tunisia and Kenya have implemented a form of DST while a host of more including Nigeria, Ghana, Uganda and Zimbabwe are at various implementation stages. (Source: Digital Services Tax in Africa – The journey so far, Deloitte https://www2.deloitte.com/za/en/pages/tax/articles/digital-services-tax-in-africa-the-journey-so-far.html
There are however variations amongst these DSTs. For instance, Austria applies its DST only to digital advertising while Poland’s on streaming services only. Dissimilarly, back home, DST is payable on income derived or accrued in Kenya from a variety of services offered through a digital marketplace. Moreover, different countries levy different tax rates for DST. For example, Austria charges DST of 5% on online advertising, Tunisia charges DST of 3% on gross income from sale of computer applications and digital services, while Kenya charges DST at the rate of 1.5% on the gross transactional value of payment received as consideration for a digital service, or the commission/fee paid to a digital marketplace provider for the use of the platform. India has also implemented a type of DST known as equalization levy at the rate of 6%.
So, how is payment for DST done? The process is done online via iTax system (https://itax.kra.go.ke). The taxpayer/ appointed tax representative logs in to their itax account using respective PIN and password. The next step is to click on Payment Registration icon on the landing page or on Payment Registration under the Payments drop down menu. An e-Payment registration form will be displayed. The taxpayer then selects the Tax head as Income Tax, Tax Sub Head as Digital Service Tax- (DST), Payment Type as Self-Assessment Tax and the specific Tax Period (Year and Month).
When entering the Digital Service Tax details, the payer will be required to enter their Monthly Turnover Value and their preferred mode of payment before submitting the details. Upon submission, the system will display a confirmation message of the payment that has been registered as well as an option to make the payment through either mobile money or credit card. Once the taxpayer clicks on the aforementioned button, the Web Checkout form will be displayed and they will be required to select their preferred mode of payment (Debit Card / Credit Card), type of card, bank and mobile number. The system will then redirect the taxpayer to the iTax Payment page for entering their payment card details before submitting in order to complete the payment process.
The digital economy represents a potentially untapped source of revenue for most countries. The implementation of DST, especially in Kenya will ensure not only sustenance, but also improvement of revenue collection to support the economy during this post Covid-19 era.
Tax Education Officer - KRA