How to Avoid Paying New Digital Tax - KRA Explains

Kenya Revenue Authority signage on a building
Kenya Revenue Authority signage on a building

The Kenya Revenue Authority (KRA) has explained the procedure for exempting a section of Kenyans from paying the Digital Service Tax (DST) which came into effect on January 2021.

In an event to demystify the new tax on Tuesday, January 26, Deputy Commissioner Caxton Masudi noted that in the event that you have no income in a particular month, one would be not be required to pay DST, as it is based on the sales made.

"If you don’t have a steady flow of income and no turn over in a specific month, your return should be zero. This is allowed, if you haven’t made any sales, make a return of zero. No harm," he explained.

Deputy Commissioner Caxton Masudi
KRA Deputy Commissioner Caxton Masudi

In such a scenario, the business or individual without any income could file the return as nil on the KRA portal.

Additionally, if one creates content and doesn’t get paid for it, or for promotional purposes then there's is no DST payable. 

Those offering services online could avoid paying the tax if the withholding tax has been already been deducted for services.

On the other hand, withholding tax has not been deducted, the taxpayers were required to remit 1.5 percent of the gross amount as DST.

"Anybody or company licensed or listed by Central Bank of Kenya is covered under DST exceptions," the taxman added.

DST is an advance tax because you can offset it against your income tax payable at the end of the year as you file your annual income tax returns

For example, if you have paid a total of Ksh 600 in the whole year as DST. And at the end of the year as you file your annual income tax return you have tax due/ payable of Ksh1, 000. Then you deduct the Ksh600 and pay the balance of Ksh400.

A digital strategist who spoke to noted that the DST tax was actually cheaper to the at 1.5% as opposed to the withholding tax where they pay 5 percent through agencies. 

On January 5, KRA stated that it had set out a target to collect about Ksh5 billion from DST between January and June 2021.

The taxman has put a spotlight on social media influencers under the new tax as more Kenyans are earning a living from facilitating online businesses and individuals to generate revenue.

"Social media influencers will be liable to pay digital service tax since their income is derived from or accrued from the provision of services through a digital marketplace or by providing digital advertising services in Kenya," KRA stated.

The tax is payable monthly on or before the 20th day of the following month.

Kenya Revenue Authority Offices along Mombasa Road, Nairobi.
Kenya Revenue Authority Offices along Mombasa Road, Nairobi.