FAQs

What requirements does KRA have in regards to documentation required for Registration by non-resident digital service providers?

The official documentation to be submitted during the online registration process should be in English. In case the documents are in a foreign language, they are required to be translated into certified English copies before upload.

What requirements does KRA have in regards to documentation required for Registration by non-resident digital service providers?

The official documentation to be submitted during the online registration process should be in English. In case the documents are in a foreign language, they are required to be translated into certified English copies before upload.

Tax Refunds are Applicable under which tax laws

Applicable law

  1. i) Income Tax Act Cap 470 (ITA) - Sections 15(3)(b), 29,30,31, 106 and the Third and Fourth Schedule.
  2. ii) Tax Procedures Act ,2015 (TPA) - Sections 47, 48 & 88, 97(b), 104(3), 108
  3. iii) Legal Notice No. 36 of 2010 – The Persons with Disabilities (Income Tax Deductions and Exemptions) Order, 2010

What happens in an instance where a taxpayer is erroneously refunded?

  1. Where the Commissioner refunds a person in error, that person shall be required to repay the amount erroneously refunded by the date set in the letter of demand.
  2. If the amount of repaid by the due date in the demand letter, it shall attract a late payment interest.

What are the Administrative Penalties & Offences for Making Fraudulent Claims ?

According to Section 88, 97(b) & 104(3) of the Tax Procedures Act,

A person who makes a fraudulent claim shall be liable to either a penalty or prosecution as follows: -

  1. A person who fraudulently makes a refund claim shall be liable to a penalty of an amount equal to two times the amount of the claim.
  2. A person who knowingly claims a refund which he/she is not entitled to commits an offence and is liable, upon conviction, to a fine not exceeding ten million shillings and/or imprisonment for a term not more than ten years.

1) What is the effective date for VAT on Digital Marketplace Supply (DMS) in Kenya?

The effective date for VAT on Digital Marketplace Supply is the 9th of October 2020. However, the VAT (Digital Marketplace Supply) Regulations 2020 provided a six (6) month transition clause from the date of gazettement of the regulations to enable taxpayers to comply.

2) Is there a turnover registration threshold for vat to be applicable to digital services provided by foreign suppliers?

There is no threshold required for registration of VAT Digital Marketplace Supplies.

3) How do foreign digital service suppliers comply with the requirements for VAT on DMS in Kenya?

  1. A foreign supplier of digital services without a fixed place of business in Kenya (overseas supplier) to a recipient in Kenya may register under the simplified tax registration framework via the iTax portal;   
  2. If a non-resident without a fixed place of business in Kenya (overseas supplier) chooses not to register through the simplified registration framework, they SHALL appoint a tax representative.
  3. The tax representative shall be responsible for performing any tax obligations required, including the submission of returns and the payment of taxes with respect to the VAT on the Digital marketplace Supply.

4) In which currency should the payments be made by foreign digital service suppliers?

The tax due is payable in Kenyan currency (KES) and deposited into the KRA accounts of the Authorized banks in Kenya. The payments user guide can be accessed through https://www.kra.go.ke/images/publications/User-Guide-on-Filing-and-Payment-of-VAT-on-DMS----August-2022.pdf

5) Can foreign Digital service suppliers without a fixed place of business in Kenya deduct input VAT incurred from Kenyan suppliers from the VAT payable?

No. The VAT (DMS) Regulations do not allow foreign digital service suppliers to deduct input VAT incurred from Kenyan suppliers from the output VAT payable.

6) Do consumers of digital services/over the top content withhold VAT from the service provider?

Consumers of digital services only withhold if they are appointed as withholding VAT agents. The rate of withholding VAT is 2%. Final consumers do not withhold VAT. You can confirm if a customer is an appointed withholding agent through the online checker; https://itax.kra.go.ke/KRA-Portal/pinChecker.htm?actionCode=loadPage&viewType=static 

 

 

7) Do digital service providers pay both VAT & DST?

Yes, foreign digital service suppliers will be liable to VAT and in case the services also fall within the scope of DST then DST will be applicable.

8) If a business advertises a product/ service on social media platform targeting Kenyan Market is VAT on DMS applicable?

Advertising on social media is considered a digital service and thus will be subjected to VAT on DMS. The supplier of the advertising service if non-resident, will be expected to charge and remit the VAT.

9) Are intermediaries such as digital insurance agents (where the insurance agent provides the digital platform but the insurance policy is ultimately issued by the insurance company) classified as digital marketplace providers?

No. If the insurance agent is using the platform for the business of selling policies, then it not liable to VAT on the digital market Place. Insurance is exempt from VAT under the VAT Act, 2013. However, if the agent pays for the insurance platform owned by a person in an export country (overseas), then yes, it will be deemed a digital service and VAT will apply.

10) Do digital service suppliers from an export country qualify for tax refunds?

No, they are not entitled to a tax refund since they cannot claim input VAT. However, the regulations allow for the offset of overpayments in subsequent tax periods.

11) Why are Educational services, which are exempt under the VAT Act, listed as taxable supply under VAT regulation on digital marketplace?

The Regulations apply to customised training and educational services supplied through a digital marketplace to Kenyan recipients.

12) Are transactions like buying word processing software, email hosting services, reading subscriptions and cloud back-up services liable to VAT on DMS?

Yes, the services enumerated above fall within the defined scope of DMS.

13) If a business entity provides a platform to companies through which they pay their suppliers and employees and then pay transaction charges for use of the platform, will the transaction qualify for VAT on DMS?

The transaction charges qualify for VAT on DMS if the supplier of the platform is a person without a fixed place of business in Kenya.

14) Who accounts for VAT on Digital Marketplace Supply when an international payment on a Social Media website is made using a payment card issued by a local bank?

The Social Media website will account for VAT since they are the supplier of the service.

15) Are taxi hailing services or food delivery services provided by Non-Residents, where the drivers/restaurants use the platform to connect their services to consumers, placed under B2B or B2C and would both DST and VAT apply or will DST apply but not VA

If the services are supplied to both businesses and consumers in Kenya both DST and VAT on DMS will apply.