The Income Tax (Digital Service Tax) Regulations 2020 (DST), introduced by the Finance Act 2020, became effective 6 months ago, from the 2nd day of January 2021
WHAT IT IS
DST is a tax payable at 1.5% on gross transaction value on income derived from Kenya from provision of services through a digital market place.
Digital service is under Rule 2 of the Regulation defined to mean, a service delivered over a digital market place, where as a digital market place has been defined as a platform (which is any electronic application) that enables direct interaction between buyers and sellers of goods and services through electronic means.
The platform includes a website and mobile application
This Tax is not targeting the common online seller of items or the Small Money Enterprises (SMEs), but DST is payable by the person who provides or facilitates the provision of a digital service to a user who is located in Kenya. As indicated under Regulation 3
One is considered to be located in Kenya under Regulation 5, if,
- the user receives the digital service from a terminal located in Kenya, where terminal includes a computer, tablet and mobile phone;
- the payment for the digital service is made using a debit or credit facility provided by a financial institution or company located in Kenya;
- the digital service is acquired through an internet protocol address registered in Kenya or an international mobile phone country code assigned to Kenya; or
- the user has a business, residential or billing address in Kenya.
HOW DST APPLIES TO YOU
DST is calculated at the rate of 1.5% of the gross transaction value of the digital service, exclusive of VAT charged on the service. Under Regulation 6
Gross transaction value is:
- the payment received as consideration for the services provided; and
- the commission or fee paid to the digital marketplace provider for the use of the platform.
A person liable to pay DST is required to submit a return in the prescribed form and remit the tax due by the 20th day of the month following the end of the month that the digital service was offered.
HOW TO REGISTER FOR DST
A resident person, or a non-resident person with a permanent establishment in Kenya, who provides a digital service in Kenya is required to be registered for digital service tax.
A non-resident person without a permanent establishment in Kenya who provides a digital service to a user in Kenya may either opt to register under the simplified tax registration framework or appoint a tax representative.
The registered person will be issued with a Personal Identification Number (PIN) for the purpose of filing returns and payment of the DST.
The regulations have been made simple and clearly stated for better understanding.
HOW WE CAN ASSIST
NetSheria International is a boutique, tech savvy and technology-driven, commercial and corporate law sub-firm of CM Advocates LLP.
NetSheria engages a pool of experienced yet innovative advocates who are subject matter authorities in established legal practice areas relating to commercial and corporate law as well as in dynamic industries such as technology and intellectual property, entertainment and financial technology (fintech).
We offer the legal support necessary to launch and grow startup companies and also assist with your tax matters and ensure that your business is tax compliant.
We will assist in the compliance with the new DST requirements including assessing and advising whether your business is liable to pay DST, registration for DST and calculation and submitting the DST returns and payment of DST.
Kindly get in touch with us for any clarifications and assistance on the above by contacting our team via +254 716209673 or on email via firstname.lastname@example.org
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