Kenya plans to enforce double taxation on tech giants

The Kenyan Treasury proposed to increase the Digital Service Tax (DST) to 3% of the gross value of online transactions.

Kenya plans to enforce double taxation on tech giants

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

Ever since the tax was introduced to date, digital service providers in Kenya are required to pay 1.5% of the gross value of online transactions.

If the proposal goes through Amazon, Google, Meta, Netflix, Twitter, and Uber among other foreign tech giants will be required to pay 3% DST exclusive of the Value Added Tax (VAT).

Side Note:

  • The Kenyan government introduced the Digital Service Tax (DST) in Kenya’s Finance Act of 2020 and became effective on the 1st January 2021.
  • The tax is levied on the sale of digital media, and e-books among other digital products and services.
  • It applies to both residents and non-residents.
  • Digital service providers operating in Kenya will be required to file a DST return and make payment for the tax due, on or before the 20th day of the following month that the digital service was offered.

In 2021, Kenya was among four countries that withheld from backing the 15% U.S. global minimum taxation deal stating that it would force them to terminate the DST.

The global minimum taxation covers multinationals companies with a turnover of at least 20 billion euros and a pre-tax profit margin above 10%.

According to the Kenya Revenue Authority (KRA), the removal of the Digital Service Tax could significantly impact the flow of tax receipts in a rapid digital global economy.

“You need to know exactly what you are getting for you to forego what you already have,”

Terra Saidimu, the KRA commissioner for intelligence and strategic operations, said at a tax forum held by the organization in October 2021.