- There is no doubt that the tech industry has come a long way from what it used to be and is now regarded as one of the most successful sectors in any country, which is why some countries have decided to start imposing Value Added Tax (VAT) on the services.
16 Percent VAT Kenya Tech Services is now applicable to customers following the introduction of the Value Added Tax Digital Marketplace Supply (Amendment) Regulations, 2022.
This is also in line with the recent drive by Kenya Revenue Authority (KRA) to the booming digital marketing economy in the country,.
With the move, services such as movie streaming on Netflix, listening to music on Spotify, e-books, and videoconferencing have begun to charge a higher VAT rate.
16 Percent VAT Kenya Tech Services: Reactions
This might not be the happiest news for users who would have to pay extra to use any one of these services.
On the flip side, the KRA aims to use this new VAT rate to generate more revenue for the government and enrich the public purse.
Also, foreign traders who earn profit from a local-based derivative contract will begin to remit a withholding tax of 15%.
One of the companies that have declared the implementation of the 16% VAT rate is Intuit UK Limited, a company that provides QuickBooks.
The company recently disclosed to its customers that it would begin levying the 16% VAT on all its online subscriptions.
Also, back in September 2022, Zoom Video Communications, the owner of the popular virtual meeting platform, began charging sales tax.
KRA’s Plan To Improve Economic Growth
Back in November 2022, the Kenya Revenue Authority (KRA) revealed that it has its sights set on the digital economy in Kenya, considering that it is the new way to go globally.
The tax body explained that it plans to devise means to generate as much revenue as possible from the sector to meet its fiscal year obligations.
With respect to this, the country has been working to adopt a “Digital Economy Blueprint”.
This is a framework to enhance Kenya’s capability to boost its economic growth and achieve its aim as a country.
According to the KRA, the document is contingent on five pillars:
1. Digital business.
2. Digital skills and values.
3. Digital government.
4. Innovation-driven entrepreneurship.
The President’s Expectations
To generate up to 25% of the country’s GDP, President William Ruto has increased the KRA’s target of Sh2.14 trillion which was only 14% of its GDP, to between Sh4 trillion and Sh5 trillion.
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