Apps downloaded in Kenya: The Kenya Revenue Authority (KRA)is now set to start taking income tax from apps developed and downloaded in Kenya.
According to a report that appeared in the Business Daily on Thursday, KRA has announced that it will work with the Communications Authority of Kenya (CA) to obtain transactions data by resident and foreign-based app developers doing business in Kenya.
“Provision of online platforms for use by third-parties is a taxable supply under the Value Added Tax (VAT) Act 2013, the KRA said Wednesday, saying this would attract the standard 16 percent levy,” says the report.
The report further quotes KRA’s deputy commissioner for corporate policy, Maurice Oray, saying that owners of the apps should pay VAT on downloads, besides other taxes under Section 3 of the Income Tax Act.
“VAT applies on those apps because you are providing a service which is not zero-rated or exempted. 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,” it quotes.
The report further says:
“Firms that generate more than Sh5 million in annual sales are required to register for VAT obligations for supplies, in addition to corporate tax at 30 percent for resident companies and 37.5 percent for foreign entities.
Those generating a maximum annual turnover of less than Sh5 million are not required to register for VAT, but pay a presumptive tax at the rate of 15 percent of the annual single business permit fee issued by a county government. This could, however, go back to a monthly turnover tax at the rate of three percent of the gross receipts of the business through the Finance Bill 2019 set to be debated by lawmakers in September.
For individuals, income tax ranges from 10 percent on the first Sh147,580 annual income, rising to 30 percent for income above Sh564,709.
The taxman will, however, have to wait for the National Assembly to ratify the “Multilateral Convention on Mutual Administrative Assistance in Tax Matters”, a treaty that enables it to exchange and get specific data on tax evaders across the world.
The taxman maintains it has invested heavily in intelligent technological systems capable of spying on transactions by businesses and homes.
Online businesses do not, however, have physical addresses or legal structures in most jurisdictions they operate, making it easy to escape the taxman’s noose as well as counties, which issue business permits.
The KRA has singled out taxation of the emerging digital economy, a headache for global revenue agencies, as a major risk to meeting the Sh6.1 trillion target in the three-year period through June 2021.