Kenya’s taxman is on the hunt for new revenue collection avenues in a bid to meet projections.
Now square in its line of sight is income earned by mobile app developers whose apps are downloaded in Kenya.
This is step one into ensuring online businesses fulfill their tax obligations.
The taxman announced that it will work in collaboration with the Communications Authority of Kenya (CA) to obtain transactions data by resident and foreign-based app developers doing business in Kenya.
The developers will face a 16% tax on all revenue-generating downloads on their platforms.
Maurice Oray, deputy commissioner for corporate policy, said, developers should pay VAT on downloads on top of other taxes listed under the Section 3 of the Income Tax Act.
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He says, “VAT applies on those apps because you are providing a service which is not zero-rated or exempted,” Mr. Oray adds, “If you are a resident here, you are supposed to pay the taxes the normal way. If you are not a resident but you have an app that’s being used here, your tax representative (a requirement under Section 16 of Tax Procedures Act) must pay your VAT and income tax.”
VAT is applicable to firms that generate more than USD 50,000, which is levied on top of 30% corportate tax for local firms while foreign firms are to pay 37.5%.
Firms with less than USD 50,000 are required to pay a presumptive tax at 15% of the annual single business permit fee issued by a county government.
For individual developers, income tax ranges between 10% on the initial $1500, which shoots to 30% for income above $5500.
Mr. Oray said, “Working with the Communications Authority (of Kenya), we should be able to get the data. But we live in a self-assessment period and expect that if you are generating revenue of that much, you self-declare so that you don’t pay extra penalties.”
This may be the plan, however, KRA will have to wait for the National Assembly to ratify the “Multilateral Convention on Mutual Administrative Assistance in Tax Matters.”
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This is the legislation that will enable it to exchange and get specific data on tax evaders the world over.
KRA has invested heavily in technology systems in a bid to sniff out errant citizens by spying on their homes and business transactions.
Online businesses are particularly difficult to track as rarely do they have physical addresses, let alone legal structures in many of the jurisdictions they operate in.
This makes it very easy to avoid their tax obligations.
This move brings to mind Uganda’s social media tax, a move that almost ensured a plunge in internet subscriptions within the first three months of its implementation.
France has also made a similar move, levying a 3% tax on all revenue made by tech giants such as Google and Amazon operating in the country.
