Tech Companies To Begin Charging The Regular 16% VAT For Digital Services

International tech companies have informed clients of the normal Value Added Tax (VAT) of 16% that will be applied to any given online service. These include Netflix movie streaming and Spotify music streaming, as the taxman focuses on Kenya’s burgeoning digital industry. E-books and videoconferencing are two other online services that will start to be subject to VAT, according to Business Daily.

Following the publication of the Value Added Tax (Digital Marketplace Supply) (Amendment) Regulations, 2022, fresh developments have taken place. According to Business Daily, “QuickBooks provider Intuit UK Limited recently informed its clients that it would begin charging the 16% VAT on all services.” According to QuickBooks, starting on or after January 31, 2023, all online subscriptions will be subject to a 16% VAT.

The sales tax was implemented by Zoom Video Communications, the owner of a virtual conference platform, in September 2022. A 15% withholding tax on profits made by foreign traders from derivative contracts with local counterparties will also become effective.

The Kenya Revenue Authority stated in November 2022 that it is interested in the digital economy as it implements initiatives to increase revenue and fulfill its financial year responsibilities. This is happening as Kenya and the rest of Africa strive to embrace a “Digital Economy Blueprint,” a framework to increase their capacity to outpace economic growth.

The paper is supported by five pillars: infrastructure, innovation-driven entrepreneurship, digital skills and values, digital governance, and digital business. President William Ruto has set a goal for the KRA of Sh2.14 trillion for the fiscal year that ends in June 2024, but he expects them to increase collection over time to between Sh4 trillion and Sh5 trillion.

“Only Sh2.1 trillion, or 14% of GDP, is being raised in revenue. We must increase 25% of our GDP, just like other middle-income nations. Between Sh4 trillion and Sh5 trillion, respectively “explained Ruto.