Frequently Asked Questions On Digital Service Tax (DST)

As the Digital Service Tax took effect from 1st January 2021 in Kenya, we have seen lots of questions about it — we try to answer some of the most frequently asked questions about the Digital Services Tax (DST).

What Is Digital Service Tax?

Digital Service Tax (DST) is payable on income derived or accrued in Kenya from services offered through a digital marketplace.

What Is A Digital Market Place?

A digital marketplace is a platform that enables direct interaction between buyers and sellers of goods and services through electronic means.

What Is The Rate of DST?

1.5% of the gross transaction value:

1. a) In the case of the provision of digital services, the payment received as consideration for the services; and

2. b) In the case of a digital marketplace, the commission or fee paid to the digital marketplace provider for the use of the platform

Note: The gross transaction value is exclusive of VAT.

When is the effective date of DST?

From 1st January 2021.

When is the due date for DST?

The return and payment with respect to DST is due on or before the 20th day following the end of the month the digital service was offered.

How is the DST registration done?

· Resident digital service providers will be required to file a payment return on iTax on or before the 20th of February 2021.

· Application for registration by non-resident digital service providers without permanent establishment shall be done through an online registration form via the iTax portal; itax.kra.go.ke/KRA-Portal/

· The User guide for the simplified registration process is accessible on the KRA Website using this link; https://www.kra.go.ke/images/publications/USERGUIDE---DST-NON-RESIDENT-REGISTRATION-REVIEWED-FINAL-18.12.2020-1.pdf

Under DST regulations, what is the scope of taxable services?

· downloadable digital content including downloadable mobile applications, e-books and films;

· over-the-top services including streaming television shows, films, music, podcasts and any form of digital content;

· sale of, licensing of, or any other form of monetising data collected about Kenyan users which has been generated from the users’ activities on a digital marketplace;

· provision of a digital marketplace;

· subscription-based media including news, magazines and journals;

· electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services;

· electronic booking or electronic ticketing services including the online sale of tickets;

· provision of search engine and automated held desk services including supply of customised search engine services;

· online distance training through pre-recorded media or e-learning including online courses and training; and

· any other service provided through a digital marketplace.

If I sell goods online, is that a digital service?

No. Although the goods are sold on an online platform, the good isn’t a service & you won’t be required to pay the digital tax. If on an e-commerce platform, it’s the platform that could be subject to the tax.

Individuals and companies use my website to sell products. Am I liable to Digital Service Tax?

Yes, DST is applicable on the commission of fee charged for the use of the platforms enabling direct interaction between buyers and sellers through a digital marketplace, website, or other online applications.

Who will be responsible for paying the tax to KRA?

The person who offers/provides the digital service will be the person who will be responsible for paying the tax to KRA. If you are just a user (have a subscription, or sell on an ecommerce site), you won’t be liable to KRA.

In which currency should the tax payments be made?

The tax due will be paid in Kenyan currency (Kenya shillings) and deposited into the KRA account of the authorized Kenyan banks

If I order digital services from abroad, will I pay the digital tax in KE?

Yes. As long as your user/customer is located in Kenya, you have to pay DST here.

How does one determine that the user is located in Kenya?

If any of the following parameters are met: -­

1. Payment proxy: Payment for the digital services is made using a credit or debit facility provided by any financial institution or company in Kenya.

2. Terminal Proxy: The user accesses the digital interface from a terminal (computer, tablet or mobile phone) located in Kenya.

3. Internet proxy: The supplies or digital services are acquired using an internet protocol address registered in Kenya or an international mobile phone country code assigned to Kenya.

4. Location proxy: The user has a business, residential or billing address in Kenya.

Will there be double taxation considering am remitting both the DST and income tax?

DST is an advance tax because you can offset it against your income tax payable at the end of the year as you file your annual income tax returns.

Is the digital tax an additional tax on my annual income?

Well, depends. If you are resident in Kenya, the digital tax is an advance tax on your final tax liability — meaning you can deduct all the DST you pay…

If I’m a small business paying turnover tax, will I still pay the digital tax?

No. Any business paying the turnover tax will not pay the DST, because there’s an existing rule that once you pay turnover tax on income, that income can’t be subject to any other tax.

What if I already pay withholding tax on my services, will I still pay the digital tax?

No. Withholding tax takes precedence & you should only pay the withholding tax and not pay the digital tax, that is: If withholding tax has been already been deducted for services offered online, then you will not be required to pay DST.

What if in a given month I have not made received any income from digital services offered?

In the event that you have no income in a particular month, you will NOT be required to pay DST. As DST is based on the sales made.

Are we going to pay more for e-government services such as e-citizen, TIMS etc.?

No. Any digital service provided by any government institution is actually exempted from paying the digital tax. So the price you pay for government services shouldn’t increase because of the digital tax…

For more insights, watch this video of an online event that was held in partnership with KRA to Demystify Digital Service Tax.

To receive any further clarifications or a more personalized advice

on Digital Services Tax, reach out to KRA on their

social media platforms: @KRAKenya

Email: callcentre@kra.go.ke