Kenya:- Kenya Finance Bill 2019:- Taxation of digital economy
*Kenya:-* Kenya Finance Bill 2019:- Taxation of digital economy In order to tap into the fast growing digital economy, the Bill proposes to tax income accruing through a digital marketplace by introducing a new charging section. Although this is a welcome move to increase the tax base, it is still not clear how international digital platforms with no physical presence in Kenya will be taxed. In this regard, it is expected that special rules may soon be formulated detailing the operational mechanics of how taxation of the digital economy will be undertaken. (It can be found here:- http://www.parliament.go.ke/sites/default/files/2019-07/Finance%20Bill%2C%20...) Below are the relevant portions of the proposed laws: * Section 3: Section 3 of the Income Tax Act is proposed to be amended by inserting the words highlighted: o (1). Subject to, and in accordance with this act, a tax to be known as income tax shall be charged each year of income upon all the income of a person, whetherresident or non-resident, which accrued in or was derived from Kenya o (2). Subject to this Act, income upon which tax is chargeable under this Act is income in respect of + A. Gains or profits from: # Any business, for whatever period of time carried on; # Any employment or services rendered; # Any right granted to any other person for use or occupation of property; + B. Dividends or interest + C. a pension, charge or annuity; ii. Any withdrawals from, or payments out of, a registered pension fund or a registered provident fund or a registered individual retirement fund; and (iii) any withdrawals from a registered home ownership savings plan + D.income chargeable to tax includes income accruing through a digital marketplace + e. ‘Digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means + E. AN amount deemed to be the income of any person under this Act or by rules made under this Act; + F. Gains accruing in the circumstances prescribed in, and computed in accordance with, the Eight Schedule + G. Subject to section 15(5A), the net gain derived on the disposal of an interest in a person, if the interest derives twenty per cent or more of its value, directly or indirectly, from immovable property in Kenya; and + H. A natural resource income * Section 5 of the Value Added Tax Act, 2013 is proposed to be amended by inserting the words highlighted o 1. A tax, to be known as the value added tax, shall be charged in accordance with the provisions of this Act on - + (a). A taxable supply made by a registered person in Kenya + b. The importation of taxable goods; and + c. The supply of taxable services o 2. The rate of tax shall be: + A. in the case of zero-rated supply, 0% or + In the case of goods listed in section B of the first schedule 8% + In any other case, 16% of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services. o ...7. The provisions of subsection (1) shall be applicable to supplies made through a digital marketplace o 8. For the purposes of this section, a ‘digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means -- Best Regards, Ephraim Percy Kenyanito Digital Program Officer *ARTICLE 19 EASTERN AFRICA * *DEFENDING FREEDOM **OF EXPRESSION AND INFORMATION* W _https://www.article19.org/regional-office/eastern-africa/ _Tw @article19eafric Fa _facebook.com/article19org <http://facebook.com/article19org> _PGP Fingerprint: B0FA394AF73DEB7AA1FDC7360CFED26DE6BA8DC1
This is a very hot topic now , because previously we had the authority looking at permanent establishment whereas now in the digital space there is no physical presence to work with Discussions are moving around whether to use the value creation model or the users model One looks at where the value to be taxed is created whereas another looks at where the number of users are located and proportion it accordingly It's also interesting to note that VAT as proposed in the bill places the incidence on the consumer and may end up being more oppressive on the digital economy as opposed to just raising revenue Best Regards, Vallarie Yiega Researcher , Committee of Fiscal Studies On Wed, Aug 7, 2019, 20:14 Ephraim Percy Kenyanito via kictanet < [email protected]> wrote:
*Kenya:-* Kenya Finance Bill 2019:- Taxation of digital economy
In order to tap into the fast growing digital economy, the Bill proposes to tax income accruing through a digital marketplace by introducing a new charging section.
Although this is a welcome move to increase the tax base, it is still not clear how international digital platforms with no physical presence in Kenya will be taxed. In this regard, it is expected that special rules may soon be formulated detailing the operational mechanics of how taxation of the digital economy will be undertaken. (It can be found here:- http://www.parliament.go.ke/sites/default/files/2019-07/Finance%20Bill%2C%20... ) Below are the relevant portions of the proposed laws:
-
Section 3: Section 3 of the Income Tax Act is proposed to be amended by inserting the words highlighted: -
(1). Subject to, and in accordance with this act, a tax to be known as income tax shall be charged each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya -
(2). Subject to this Act, income upon which tax is chargeable under this Act is income in respect of -
A. Gains or profits from: -
Any business, for whatever period of time carried on; -
Any employment or services rendered; -
Any right granted to any other person for use or occupation of property; -
B. Dividends or interest -
C. a pension, charge or annuity; ii. Any withdrawals from, or payments out of, a registered pension fund or a registered provident fund or a registered individual retirement fund; and (iii) any withdrawals from a registered home ownership savings plan -
D.income chargeable to tax includes income accruing through a digital marketplace -
e. ‘Digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means -
E. AN amount deemed to be the income of any person under this Act or by rules made under this Act; -
F. Gains accruing in the circumstances prescribed in, and computed in accordance with, the Eight Schedule -
G. Subject to section 15(5A), the net gain derived on the disposal of an interest in a person, if the interest derives twenty per cent or more of its value, directly or indirectly, from immovable property in Kenya; and -
H. A natural resource income -
Section 5 of the Value Added Tax Act, 2013 is proposed to be amended by inserting the words highlighted -
1. A tax, to be known as the value added tax, shall be charged in accordance with the provisions of this Act on - -
(a). A taxable supply made by a registered person in Kenya -
b. The importation of taxable goods; and -
c. The supply of taxable services -
2. The rate of tax shall be: -
A. in the case of zero-rated supply, 0% or -
In the case of goods listed in section B of the first schedule 8% -
In any other case, 16% of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services. -
...7. The provisions of subsection (1) shall be applicable to supplies made through a digital marketplace -
8. For the purposes of this section, a ‘digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means
-- Best Regards, Ephraim Percy Kenyanito Digital Program Officer
*ARTICLE 19 EASTERN AFRICA * *DEFENDING FREEDOM **OF EXPRESSION AND INFORMATION* W *https://www.article19.org/regional-office/eastern-africa/ <https://www.article19.org/regional-office/eastern-africa/> *Tw @article19eafric Fa *facebook.com/article19org <http://facebook.com/article19org> *PGP Fingerprint: B0FA394AF73DEB7AA1FDC7360CFED26DE6BA8DC1 _______________________________________________ kictanet mailing list [email protected] https://lists.kictanet.or.ke/mailman/listinfo/kictanet Twitter: http://twitter.com/kictanet Facebook: https://www.facebook.com/KICTANet/
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Ephraim This is an important topic. I suggest that we take this one seriously. We must prepare a substantive response to the bill and make our representations super clear. Regards *Ali Hussein* *Principal* *AHK & Associates* Tel: +254 713 601113 Twitter: @AliHKassim Skype: abu-jomo LinkedIn: http://ke.linkedin.com/in/alihkassim <http://ke.linkedin.com/in/alihkassim> Any information of a personal nature expressed in this email are purely mine and do not necessarily reflect the official positions of the organizations that I work with. On Wed, Aug 7, 2019 at 8:08 PM Ephraim Percy Kenyanito via kictanet < [email protected]> wrote:
*Kenya:-* Kenya Finance Bill 2019:- Taxation of digital economy
In order to tap into the fast growing digital economy, the Bill proposes to tax income accruing through a digital marketplace by introducing a new charging section.
Although this is a welcome move to increase the tax base, it is still not clear how international digital platforms with no physical presence in Kenya will be taxed. In this regard, it is expected that special rules may soon be formulated detailing the operational mechanics of how taxation of the digital economy will be undertaken. (It can be found here:- http://www.parliament.go.ke/sites/default/files/2019-07/Finance%20Bill%2C%20... ) Below are the relevant portions of the proposed laws:
-
Section 3: Section 3 of the Income Tax Act is proposed to be amended by inserting the words highlighted: -
(1). Subject to, and in accordance with this act, a tax to be known as income tax shall be charged each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya -
(2). Subject to this Act, income upon which tax is chargeable under this Act is income in respect of -
A. Gains or profits from: -
Any business, for whatever period of time carried on; -
Any employment or services rendered; -
Any right granted to any other person for use or occupation of property; -
B. Dividends or interest -
C. a pension, charge or annuity; ii. Any withdrawals from, or payments out of, a registered pension fund or a registered provident fund or a registered individual retirement fund; and (iii) any withdrawals from a registered home ownership savings plan -
D.income chargeable to tax includes income accruing through a digital marketplace -
e. ‘Digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means -
E. AN amount deemed to be the income of any person under this Act or by rules made under this Act; -
F. Gains accruing in the circumstances prescribed in, and computed in accordance with, the Eight Schedule -
G. Subject to section 15(5A), the net gain derived on the disposal of an interest in a person, if the interest derives twenty per cent or more of its value, directly or indirectly, from immovable property in Kenya; and -
H. A natural resource income -
Section 5 of the Value Added Tax Act, 2013 is proposed to be amended by inserting the words highlighted -
1. A tax, to be known as the value added tax, shall be charged in accordance with the provisions of this Act on - -
(a). A taxable supply made by a registered person in Kenya -
b. The importation of taxable goods; and -
c. The supply of taxable services -
2. The rate of tax shall be: -
A. in the case of zero-rated supply, 0% or -
In the case of goods listed in section B of the first schedule 8% -
In any other case, 16% of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services. -
...7. The provisions of subsection (1) shall be applicable to supplies made through a digital marketplace -
8. For the purposes of this section, a ‘digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means
-- Best Regards, Ephraim Percy Kenyanito Digital Program Officer
*ARTICLE 19 EASTERN AFRICA * *DEFENDING FREEDOM **OF EXPRESSION AND INFORMATION* W *https://www.article19.org/regional-office/eastern-africa/ <https://www.article19.org/regional-office/eastern-africa/> *Tw @article19eafric Fa *facebook.com/article19org <http://facebook.com/article19org> *PGP Fingerprint: B0FA394AF73DEB7AA1FDC7360CFED26DE6BA8DC1 _______________________________________________ kictanet mailing list [email protected] https://lists.kictanet.or.ke/mailman/listinfo/kictanet Twitter: http://twitter.com/kictanet Facebook: https://www.facebook.com/KICTANet/
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The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform for people and institutions interested and involved in ICT policy and regulation. The network aims to act as a catalyst for reform in the ICT sector in support of the national aim of ICT enabled growth and development.
KICTANetiquette : Adhere to the same standards of acceptable behaviors online that you follow in real life: respect people's times and bandwidth, share knowledge, don't flame or abuse or personalize, respect privacy, do not spam, do not market your wares or qualifications.
Hi Ephraim Thanks for this. Does ‘direct interaction between buyers and sellers’ also include direct online fundraising such as those that appear on many NGOs’ websites via the Donate buttons? I ask because ultimately, digital marketing includes elements of fundraising and NGOs generally are not tax exempt. Or is this purely for commercial exchange goods and services? Regards Beryl Sent from my iPad
On 7 Aug 2019, at 8:07 PM, Ephraim Percy Kenyanito via kictanet <[email protected]> wrote:
Kenya:- Kenya Finance Bill 2019:- Taxation of digital economy
In order to tap into the fast growing digital economy, the Bill proposes to tax income accruing through a digital marketplace by introducing a new charging section.
Although this is a welcome move to increase the tax base, it is still not clear how international digital platforms with no physical presence in Kenya will be taxed. In this regard, it is expected that special rules may soon be formulated detailing the operational mechanics of how taxation of the digital economy will be undertaken. (It can be found here:- http://www.parliament.go.ke/sites/default/files/2019-07/Finance%20Bill%2C%20...)
Below are the relevant portions of the proposed laws:
Section 3: Section 3 of the Income Tax Act is proposed to be amended by inserting the words highlighted: (1). Subject to, and in accordance with this act, a tax to be known as income tax shall be charged each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya (2). Subject to this Act, income upon which tax is chargeable under this Act is income in respect of A. Gains or profits from: Any business, for whatever period of time carried on; Any employment or services rendered; Any right granted to any other person for use or occupation of property; B. Dividends or interest C. a pension, charge or annuity; ii. Any withdrawals from, or payments out of, a registered pension fund or a registered provident fund or a registered individual retirement fund; and (iii) any withdrawals from a registered home ownership savings plan D.income chargeable to tax includes income accruing through a digital marketplace e. ‘Digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means E. AN amount deemed to be the income of any person under this Act or by rules made under this Act; F. Gains accruing in the circumstances prescribed in, and computed in accordance with, the Eight Schedule G. Subject to section 15(5A), the net gain derived on the disposal of an interest in a person, if the interest derives twenty per cent or more of its value, directly or indirectly, from immovable property in Kenya; and H. A natural resource income Section 5 of the Value Added Tax Act, 2013 is proposed to be amended by inserting the words highlighted 1. A tax, to be known as the value added tax, shall be charged in accordance with the provisions of this Act on - (a). A taxable supply made by a registered person in Kenya b. The importation of taxable goods; and c. The supply of taxable services 2. The rate of tax shall be: A. in the case of zero-rated supply, 0% or In the case of goods listed in section B of the first schedule 8% In any other case, 16% of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services. ...7. The provisions of subsection (1) shall be applicable to supplies made through a digital marketplace 8. For the purposes of this section, a ‘digital marketplace’ means a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means --
Best Regards, Ephraim Percy Kenyanito Digital Program Officer
ARTICLE 19 EASTERN AFRICA DEFENDING FREEDOM OF EXPRESSION AND INFORMATION W https://www.article19.org/regional-office/eastern-africa/ Tw @article19eafric Fa facebook.com/article19org PGP Fingerprint: B0FA394AF73DEB7AA1FDC7360CFED26DE6BA8DC1 <Finance Bill 2019.pdf> _______________________________________________ kictanet mailing list [email protected] https://lists.kictanet.or.ke/mailman/listinfo/kictanet Twitter: http://twitter.com/kictanet Facebook: https://www.facebook.com/KICTANet/
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The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform for people and institutions interested and involved in ICT policy and regulation. The network aims to act as a catalyst for reform in the ICT sector in support of the national aim of ICT enabled growth and development.
KICTANetiquette : Adhere to the same standards of acceptable behaviors online that you follow in real life: respect people's times and bandwidth, share knowledge, don't flame or abuse or personalize, respect privacy, do not spam, do not market your wares or qualifications.
participants (4)
-
Ali Hussein -
Beryl Aidi -
Ephraim Percy Kenyanito -
Vallarie Yiega