The National Treasury on Thursday introduced digital tax on e-commerce services in the country, mostly targeting consumers who pay for goods and services procured online.

Treasury CS Ukur Yatani said that the Digital Marketplace Supply Regulations, 2020, will see online transactions attract a 1.5 percent digital tax as the government goes after the growing e-commerce in the country.

The likes of Netflix, HBO, Amazon Prime among others included in the tax regime in the country. The Digital Marketplace Supply Regulations, is likely to disrupt operations for both local and international companies.

The government will restrict these firms from the Kenyan market if they fail to comply with the regulations.

A person who fails to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to restriction of access to the digital marketplace in Kenya until such obligations are fulfilled.

The new law was revised to 14 per cent in April this year following the outbreak of the coronavirus pandemic. The proposals will also apply to digital news subscription-based media content including news, magazines, journals, streaming of TV shows and music, podcasts and online gaming shall also be subject to the new digital services VAT.

Treasury also wants intermediaries be required to charge and account for the VAT on such supplies whether such other person is registered for VAT or not. The VAT proposals come in the wake of a new digital services tax introduced by the National Treasury that are expected to come in effect this financial year.

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