April 2024 – VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023, for new simplified VAT registration; registration threshold removed
The Revenue Authority updated the 2020 law on compliance VAT rules for providers and marketplaces of digital services. The regulations cover:
- Digital or electronic services new definitions as in scope for VAT
- VAT determination – time and place of supply rules, corrective returns etc
- Registration procedures for new simplified path but with no right to deduct VAT
- VAT invoice obligations and exemptions
- Removal of standard KES 5 million (approx. €34,000) annual threshold for non-residents suppliers of digital services from 1 July 2023
August 2022 – B2B reverse charge option withdrawn for foreign providers of digital services
The VAT Digital Marketplace Supply Regulations, which governs the rules for non-resident providers and marketplaces to charge Kenyan VAT, have been updated with a number of changes, including:
- Withdrawal of the reverse charge for B2B transactions. This will mean foreign digital services providers may have to VAT register as there is no VAT registration threshold. The Kenyan business customers will though be able to deduct the VAT input.
- Exempt digital education services from VAT
- Exempt non-residents from having to produce electronic invoices
VAT on electronic services in Kenya
Kenya obliges providers and marketplaces facilitating the sale of electronic or digital services to charge and collect Value Added Tax on their sales to local consumers. Sellers have faced this requirement since 2 September 2013. The (Digital Marketplace Supply) Regulations 2020 confirmed the liabilities on electronic platforms and marketplaces with effect from March 2021.
Note: Kenyan Digital Services Tax is also payable at 1.5% since the start of 2021.
What digital services are liable to Kenya VAT?
The VAT Act lists income the following e-services are being considered subject to VAT:
- Software and the updating of software
- Services that link the supplier to the recipient, including transportation-hailing platforms
- Gaming including games of chance
- Search engine services
- Sales, licensing or any other form of monetizing data generated from users’ activities
- Subscriptions for online journals and magazines
- Images, text and information
- Access to databases
- Online education programs, including distance teaching programs through prerecorded media, e-learning, education webcasts, webinars, online courses and training, but excluding education services exempted under the First Schedule to the Act
- Streaming or download music and films
- Websites, web hosting or remote maintenance of programs and equipment
- Political, cultural, artistic, sporting, scientific and other broadcasts and events, including broadcast television
Determining if Kenyan VAT is due
Under the destination principle, VAT is due if the customer is resident or consumes the service in Kenya. The providers or marketplaces may reply on the following examples of evidence to support this determination:
- Address of the customer
- IP address
- Banking details or credit card issuer address
- SIM card country code
Kenya provides a simplified digital service registrations and filings process. There is no VAT registration threshold for non-residents. There is no requirement to appoint a Fiscal Representative as there is for the regular VAT registration. However, this includes no right to deduct any Kenyan VAT incurred. For B2C transactions, the Regulations require the supplier to issue an invoice or receipt showing the value of the supply and tax deducted.
VAT returns should be filed monthly, and any taxes due should be submitted by the 20th of the month following the reporting period.
B2B digital services
Since July 2022, the reverse charge option on B2B supplies by digital non-resident providers has been withdrawn. From July 2023 there is no VAT registration threshold for non-residents, they will have to VAT register and charge their local business client VAT.
You can follow VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
Africa & Middle East VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Cameroon||19.5%||Jan 2020||XAF 50 million|
|Egypt||14%||Sep 2016||EGP 500,000|
|Ghana||12.5%||Apr 2022||GHS 200,000|
|Kenya||16%||Sep 2013||-||Registration threshold removed 2023|
|Oman||5%||Apr 2021||OMR 35,000|
|Saudi Arabia||15%||Jan 2018||Nil|
|Senegal||18%||Jan 2023||Nil||Fiscal representative required|
|Sierra Leone||15%||SLE 100,000|
|South Africa||15%||Jun 2014||ZAR 1 million|
|Tanzania||18%||Jul 2022||Nil||Residents since Jul 2015|
|Tunisia||19%||Jan 2020||Nil||Withholding VAT; 3% Royalty Tax|
|Uganda||18%||Jan 2020||UGX 150m|
|United Arab Emirates||5%||Jan 2018||AED 375,000|