Expansion of Digital Services Tax (DST)
The Bill expands the scope of DST to include any income generated by businesses over the internet or electronic networks. This is a deliberate effort to expand the tax base of the digital economy.
The Bill also proposes to exclude the following from the ambit of DST:
- Transactions by resident persons. Business carried out over the internet is taxed as business income.
- Payments made to nonresidents which are subject to withholding tax.
- Income received from transmission of messages by an apparatus established in or outside Kenya.
Persons subject to the DST will be required to submit returns and pay tax due on or before the 20th day of the month following the month in which the digital services were offered.
Exemption from withholding Value Added Tax (VAT)
The Bill seeks to take away the power of the Commissioner to exempt any supplier from withholding VAT obligations.
Currently, if a taxpayer can demonstrate to the Commissioner that due to the nature of his business and as a result of withholding VAT he will be in a continuous VAT credit for a period of not less than 24 months, the Commissioner can exempt such taxpayer from the withholding VAT regime.
This proposal will be punitive to taxpayers who are in perpetual VAT credit position as it will exacerbate the situation especially due to the delayed settlement of VAT refunds.
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