Online businesses to pay taxes for digital transactions – KBC

The Kenyan Government is planning to introduce a 1.15 percent Digital Service Tax informed by the growing number of business transactions being carried out online.

While presenting his maiden budget statement at the National Assembly on Thursday afternoon, Treasury CS Ukur Yatani noted that it is difficult to effectively tax the online income derived through digital platforms, hence the need to have a framework in place.

Earlier in June, the National Treasury published draft rules to bring the digital market place under the tax net, termed as the Value Added Tax (Digital Marketplace Supply) Regulations, 2020.

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.

Businesses targeted in the VAT net include the sale of electronic event tickets, software programs, web hosting services and downloadable digital content.

Failure to file the VAT returns within the prescribed period-the 20^th day of the month following the end of the tax period will attract penalties including restrictions to the access of the local digital market place.

On digitising the economy, the CS said that the government will continue to boost digital literacy and skills as well expand digital infrastructure to improve access to affordable broadband connectivity.

In this regard, the CS proposed Ksh 14.9 billion to fund initiatives in the Information Communication Technology sector.

Specifically, Ksh 700 million for government shared services, Ksh 800 million for the Digital Literacy Program and Ksh 1.2 billion for the rehabilitation of the National Optic Fibre Backbone Phase 11 Expansion Cable.

CS Yatani also on digitization said the government is fast-tracking the establishment of the Konza Technopolis City which will position Kenya as a world-class ICT hub.

To this end, he allocated Ksh 6.3billion towards the Horizontal Infrastructure Phase 1 (EPCF) for Konza, Ksh 400 million for the ongoing construction of Konza Technopolis Complex Phase 1B, and Ksh 5.1 billion for Konza Data Center and Smart City Facilities Project.