The Kenyan government has drawn back on a new regulation that would have seen companies banned from conducting business online for failing to adhere to tax obligations. This new law was set to be imposed on both foreign and local enterprises.
This recently published Digital Market Supply Regulations by Treasury Cabinet Secretary Ukur Yatani now indicates that the country has dropped this earlier proposal. The law suggested that firms which failed to pay value-added tax (VAT) and a 1.5% digital service tax would be barred from operating in the country.
Instead, these latest regulations will now just have these non-compliant firms face fines and sanctions. This is in accordance with the Tax Procedure Act Kenya which inflicts a penalty equivalent to double the amount dodged. Alternatively, one could face a KES 100,000 for non-compliance with the electronic tax system.
“A person who fails to comply with the provisions of these Regulations shall be liable to the penalties prescribed under the Act or the Tax Procedures Act, 2015,” states the September 25 gazette notice.
This backtrack comes alongside the decision to relax its earlier requirement that digital businesses register with the Kenya Revenue Authority (KRA) within 30 days. Firms now have a six-month window to do so.
To register, foreign businesses need to provide various details including:
- Website and uniform resource locators (URLs)
- The national tax identification number issued to the supplier
- Certificate of incorporation
- Postal address
- Name of the person handling tax affairs of the supplier
- Email address and phone numbers
The new law that is set to take effect on January 1, 2021 is expected to see the digital marketplace in Kenya change and have a cost effect on the millions of Kenyan consumers.