Explainer: Everything you need to know about Kenya’s Digital Service Tax

Treasury CS Ukur Yattani introduced the Digital Service Tax during the reading of the 2020/2021 budget on June 11, 2020.

In his speech, CS Yattani announced that a 1.5% DST would apply on the value of transactions conducted by online businesses.

The Kenya Revenue Authority (KRA) has released a detailed explanation of the online businesses which will now be liable to remit the tax.

The taxman has defined a digital marketplace as: "a platform that enables direct interaction between buyers and sellers of goods and services through electronic means."

DST will be charged on; the payment received for services and the commission or fee paid to the digital marketplace provider for the use of the platform.

Goods sold through the digital platforms will not be liable to the new tax.

Who will pay DST?

The new tax will be paid by both resident and non-resident digital service providers and digital market place providers.

The tax will apply both in business-to-business (B2B) and business-to-consumer (B2C) instances.

KRA further clarified:- "DST is applicable to digital services, thus for goods sold on digital or social media platforms the suppliers are required to declare the income earned under the self-assessment regime provided under the relevant Tax Laws."

What services are taxable under DST?

KRA has listed the taxable services as follows:-

Downloadable digital content including downloadable mobile applications, e-books and films;
Over-the-top services including streaming television shows, films, music, podcasts and any form of digital content;
Sale of, licensing of, or any other form of monetizing data collected about Kenyan users which has been generated from the users’ activities on a digital marketplace;
Provision of a digital marketplace;
Subscription-based media including news, magazines and journals;
Electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;
Electronic booking or electronic ticketing services including the online sale of tickets;
Provision of search engine and automated help desk services including supply of customized search engine services;
Online distance training through pre-recorded media or e-learning including online courses and training; and
Any other service provided through a digital marketplace.

How does a digital marketplace register to remit DST?

The payment will be due on or before the 20th day of every month, resident digital service providers will be required to file a payment return on iTax on or before the 20th of February 2021.

For non-resident entities, they will be required to register through the iTax portal under strict guidelines contained here.