Governance

U.S Pressures Kenyan Gov’t Not To Tax Certain American Digital Products

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KRA Tax Online Businesses and Services
Image Courtesy Ushuru

In July, Kenyans were treated to the news of the newly signed Finance Bill 2020 by President Kenyatta. The most significant detail about the new law being the tax on digital services.

Upon further conversations with the American Chamber of Commerce Communications lead, Rhoda Mwangi, we found out that there is more than meets the eye.

She noted that should we move ahead with this Bill, the U.S would strike back and there would most likely be a trade war. It looks like her speculations are coming to fruition. The U.S is now apparently putting pressure on GoK to exempt them from some of these rules.

What Do The Tax Rules mean for Kenyans and the U.S?

With this new Bill, the country’s digital sector will now impose a new 1.5% tax on all digital transactions. This will then see online businesses pay tax on all income they source from the state.

The digital service tax will be payable exactly at the time of transaction of payment to service providers. Additionally, KRA’s new special unit will monitor this whole process by tracking digital revenues.

The regulations propose to charge VAT to a wide range of digital services. This includes:

  • Downloadable digital content
  • Subscription-based media
  • The supply of music, films and games
  • The overall supply of digital content for listening, viewing or playing on any audio, visual or digital media.
  • Software programs including drivers, website filters, and firewalls.
  • Tickets purchased through the internet for live events, theatres, restaurants
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Exemptions the U.S is looking For

According to the East African, the U.S states that Kenya must not tax digital products. Aside from that, the US also wants Kenya not to compel US firms operating in Kenya to store data locally.

It is also possible that select elements of processing can only be performed via a data centre based in Kenya. This means that Nairobi must include no provisions that require US firms operating to store data locally.

These are the exemptions the U.S is looking for. Oh, and we also have to publicly support Israel or forget the entire trade deal.

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2 Comments

  1. Does that mean Israel gets the same trade deal on digital transactions?

  2. sure i agree on it for by using those mentioned items creates self employment for young generation by starting small businesses within community to control poverty in our country kenya.thanks am pastor john mbae mutuambugu from samburu county in kenya

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