President Uhuru Kenyatta on Tuesday signed into law the 2020-21 Budget, the 2020 Finance Bill and the 2019-20 Third Supplementary Budget at State House, Nairobi which will see Kenyans pay for digital services.
The 1.5 percent digital services tax levied on gross sales by online businesses such as Netflix and Uber will take in January.
The 2020 Finance Bill which is now law has several amendments targeted at cushioning Kenyans from the adverse effects of the Covid-19 pandemic.
Some of the amendments in the Finance Act include the zero rating of VAT on maize, cassava and wheat flour for six months so as to make flour affordable.
The new Finance Act also extends the zero rating of VAT on cooking gas for one year.
The National Treasury last month introduced digital tax, a Value Added Tax (VAT) on e-commerce services in the country, mostly targeting consumers who will be forced to have to pay higher for goods and services procured online.
National Treasury Cabinet Secretary Ukur Yatani said that the Digital Marketplace Supply Regulations, 2020, will see online transactions attract a 1.5 percent digital tax as the government goes after the growing e-commerce in the country.
This move will have the likes of Netflix, HBO, Amazon Prime among others included in the tax regime in the country, many of whom signed to provide services to Kenyans and had not registered for VAT.
One aspect of the law is that the government will restrict these firms from the Kenyan market if they fail to comply with the regulations.
“A person who fails to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to restriction of access to the digital marketplace in Kenya until such obligations are fulfilled,” the new law reads in part.
The law will also apply to digital news subscription-based media content including news, magazines, journals, streaming of TV shows and music, podcasts and online gaming shall also be subject to the new digital services VAT.
The National Treasury also wants intermediaries who supply digital products on behalf of suppliers be required to charge and account for the VAT on such supplies whether such other person is registered for VAT or not.
The VAT law come in the wake of a new digital services tax introduced by the National Treasury that are expected to come in effect this financial year.