Digital banks ‘confused’ over new tax

Wednesday, June 10th, 2020 23:11 |
KRA headquarters. Photo/File

Noel Wandera @NoelWandera5

Digital lenders still do not understand how the market tax will affect their lending service delivery.

Digital Lenders Association of Kenya (Dlak) chairman Robert Masinde said though the lenders are subjected to corporate and personal tax regimes, what is still unclear is how the proposed digital market tax will affect their services.

“It is a matter we are still engaging with the government alongside other stakeholders such as the Kenya Private Sector Alliance,” said Masinde.

Value added tax

The Finance Bill 2020 contains measures that will affect companies operating in the digital space within Kenya. The proposed measures have an anticipated effective date of January 1, 2021.

Non-residents are required to register and charge Value Added Tax (VAT) for electronic services supplied to persons who are not registered for VAT in Kenya.

Electronic services include websites, web-hosting services, remote maintenance of programmes and equipment, software and updating of software, access to databases, self-education packages, music, films or games and political, cultural, artistic, sporting, scientific and other broadcasts and events including broadcast television provided or delivered on or through a telecommunications network.

While the Finance Act, 2019 introduced provisions subjecting income earned or accrued through a digital market place to income tax and VAT, regulations setting out the detailed mechanism for the implementation of the provisions of the Finance Act that were to be issued by Treasury Cabinet secretary have not yet been published.

The Act defines a “digital market place” as a platform enabling direct interaction between buyers and sellers of goods and services through electronic means.

Analysts are, however, not clear about the meaning of a digital market place, nor those who will be impacted by the digital tax.

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