The government seeks to increase digital service tax from 1.5% to 3% of the gross transaction value. The proposal is one of several amendments contained in Finance Bill 2022, intended to enhance revenue collection.
The Bill further proposes to amend the VAT Act, to clarify that the requirement for mainstream VAT registration does not apply to persons supplying imported digital services over the internet or through a digital marketplace. The Value Added Tax (Digital Marketplace Supply) Regulations of 2020 provide for these persons to register through a simplified VAT registration framework. They may also appoint a tax representative if they elect not to register. Unlike the mainstream VAT registration, that requires an annual turnover threshold of KES 5,000,000, the Regulations do not provide for a registration threshold.
The Bill has been submitted to the Parliament's Departmental Committee on Finance and National Planning for review. If accepted, the proposed amendments will take effect from 01 July 2022.