Kenya’s Tax Authority targets online businesses

In a bid to reduce revenue leakage through tax evasion, Kenya’s taxman is targeting online businesses which use the Internet to market and sell products.

According to Kenya’s Revenue Authority (KRA), some of the businesses have invested in online channels to provide services and drive sales neither pay taxes nor file annual returns. “KRA would like to advise that unless income or supply is expressly exempt in the law, appropriate taxes should be paid, the KRA would also like to remind taxpayers that the self-assessment regime requires them to file and pay taxes,” the taxman said in a statement.

Earlier this year, KRA noted that it has invested heavily in intelligent technological systems capable of spying on transactions by businesses and homes. Given that online businesses do not have physical addresses or legal structures in the jurisdictions that they operate, it is easy to escape paying taxes and business permits.

In Kenya, firms with annual revenue of more than Sh5 million ($49.49 million) are under the law required to register for value-added tax (VAT) which ensures they pay the standard 16 percent tax.

Meanwhile, in January this year, the government also enforced a law which ensures that businesses with less than Sh5 million annual revenue pay a 15 percent presumptive tax of the annual single business permit fee issued by a county government.

Presently, the KRA has singled out taxation of the emerging digital economy as a major risk to meeting the Sh6.1 trillion target in the three-year period through June 2021.