A 1.5% digital services tax will be imposed on local platforms offering online jobs, rental, food delivery and ride-hailing services, if Parliament approves a proposed revenue-raising proposal by the National Treasury.
In the Finance Bill 2024, National Treasurer Njuguna Ndongo proposed amendments to extend the digital service tax to platforms owned by foreign companies but with a presence in Kenya.
In the changes, the definition of “digital market” is expanded to include online platforms that provide services such as taxis, changes that will increase the tax burden on ride-hailing companies such as Uber and Bolt, which also pay corporate income tax. They also have a presence in Kenya.
Section 3 of Income Tax is amended in subsection (3), by deleting paragraph (a) and replacing it with the following new paragraph – “Digital Marketplace” means an online or electronic platform that enables a person to sell or supply goods, “property or services” , reads part of the draft finance bill.
Some of the services listed include ride-hailing services, food delivery, freelance services, professional services, rental services, and task-based services.
“And any other service that is not exempt from tax under this law (income tax).”
Residents with online platforms where goods and services are exchanged are exempt from digital services tax, with most of them expected to pay a 30 percent corporate income tax.
The DST was only expected to be paid by foreign companies without a permanent establishment.
The digital service tax came into effect on January 1, 2021, and is levied on the sale of e-books, movies, music, games, and other digital content. The KRA predicted that it would collect Sh13.9 billion from the tax within three years of its implementation. Other than ride-hailing services, other online services that have seen a recent boom include food delivery.
