New KRA Tax Targeting Mobile Phone Apps

  • Kenya Revenue Authority has been working overtime to maximise on the collection of taxes in the country.

    In their latest announcement, all mobile application developers will attract a Value Added Tax (VAT) of 16 per cent for every download and resultant revenue.

    Provision of online platforms for use by third-parties is a taxable supply under the VAT Act 2013, the revenue collection authority revealed on Wednesday.

    According to Business Daily, the Deputy Commissioner for Corporate Policy, Maurice Oray, added that all owners of the apps should pay VAT on downloads, besides other taxes under Section 3 of the Income Tax Act.

    “VAT applies to those apps because you are providing a service which is not zero-rated or exempted,

    If you are a resident here, you are supposed to pay the taxes the normal way. If you are not a resident but you have an app that’s being used here, your tax representative (a requirement under Section 16 of Tax Procedures Act) must pay your VAT and income tax,” Oray revealed.

    The revenue authority further revealed that they would work closely with the Communication Authority of Kenya to ensure they get accurate data on the same.

    This would also assist them to obtain transaction data by resident and foreign-based app developers doing business in Kenya.

    Firms that generate more than Ksh5 million in annual sales are required to register for VAT obligations for supplies, in addition to a corporate tax set at 30 per cent for resident companies and 37.5 per cent for foreign entities.

    Those generating a maximum annual turnover of less than Ksh5 million, are not required to register for VAT, but pay a presumptive tax at the rate of 15 per cent of the annual single business permit fee issued by a county government.

    The taxman will, however, have to wait for the National Assembly to ratify the “Multilateral Convention on Mutual Administrative Assistance in Tax Matters”, a treaty that enables it to exchange and get specific data on tax evaders across the world.