Kenya Revenue Authority set to tax Income-generating Apps in Kenya

The Kenya Revenue Authority (KRA) is set to tax income-generating online applications (apps) in Kenya, in a bid to get a tax cut from online businesses. The 16% tax will focus on the app’s downloads and its resultant revenue.

KRA plans to collaborate with the Communications Authority of Kenya (CA), to retrieve transactions data of all local and foreign-based app developers that are operating in Kenya. The KRA notes that they are liable by law to tax online businesses, evident in the Value Added Tax (VAT) Act 2013.

According to the deputy commissioner for corporate policy, Maurice Oray, app owners will be taxed VAT on downloads, aside from other taxes that align with Section 3 of the Income Tax Act. He mentioned that VAT applies to apps, due to the fact that they provide services which are neither zero-rated or exempted.

He mentioned that online apps resident in Kenya will remit their tax the normal way, whilst foreign-based apps that are used in Kenya will remit its VAT and income tax via a tax representative.

All startups that generate over Sh5 million in annual sales will be mandated to register for VAT obligations for supplies. They will also pay a corporate tax of 30%, if they are resident companies and 37.5% if they are foreign companies.

However, companies who generate an annual turnover of less than Sh5 million are not mandated to register for VAT. They will, however, remit a presumptive tax of 15% of their annual single business permit fee as issued by the county government. They can also remit a monthly turnover tax of 3% gross receipts of their business via the Finance Bill 2019 which will be debated in September 2019.

Individuals will have to remit an income tax of 10% on their first Sh147,580 annual income, and 30% for income higher than Sh564,709.