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Mercy Mwai @wangumarci

Members of the National Assembly yesterday passed regulations preparing the way for Kenya Revenue Authority (KRA) to raid the digital marketplace for taxes.

The MPs passed the Value Added Tax (electronic tax invoice) regulations, 2020 and the value added tax (digital marketplace supply) regulations, 2020 after concluding a debate on them.

It follows the passing into law provisions on taxing the digital marketplace through the Finance Act, 2019 which granted the Cabinet Secretary for the National Treasury the role of setting tax modalities.Gazettement of the regulations will ease pressure on KRA, as it provides the authority with necessary information on transactions involving the persons registered for VAT, by tapping the ever-growing digital marketplace.

“This House adopts the Report of the Committee on Delegated Legislation on its consideration of the Value Added Tax (Digital MarketPlace Supply) Regulations, 2020 laid on the Table of the House on Tuesday, February 16, 2021,” read the motion passed by the house.

The Value Added Tax (Digital MarketPlace Supply) seeks to facilitate the implementation of VAT on supplies of services made in the country through a digital marketplace by non-resident suppliers who have no physical presence in the country.

“This will create a level playing field for all players by providing a mechanism for collection of consumption tax in the digital space and counter the unfair advantage previously enjoyed by non-resident suppliers over local suppliers,” reads the regulation in part.

With the passage of the Value Added Tax (Digital MarketPlace Supply) Regulations, the scope of digital services has expanded the scope of digital services subject to VAT to cater for new-age digital inventions supplied in Kenya.

The regulations will enable efficient tax collection by KRA as it provides the Authority with necessary information on transactions involving the persons registered for VAT.

This makes it a mandatory requirement that every VAT registered taxpayer must have a register thereby widening the tax base as the taxpayer will be required to activate VAT obligation.

The expanded scope will be added to what is currently being subjected to the tax including electronic services (such as websites software, information, broadcasts, music, films and games.

Subjected to VAT

Those that will be subjected to VAT will include downloadable digital content including mobile applications, e-books and films, subscription-based media including news, magazines and journals, over-the-top services including streaming television shows and films.

Others are music, podcasts, software, drivers, website, filters and firewalls, electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services, music and games, search engine and automated helpdesk services including customisable search engine services, tickets for live events, theatres and restaurants.