Google move to implement digital Vat boon to Kenya’s revenue efforts

Google, a major tech company, has announced its plans to implement a 16% VAT on all taxable gods and services in Kenya, on its platform. The implementation is expected to start from February 1^st 2023.

The move comes after the Kenyan government introduced the VAT (Digital Marketplace Supply) (Amendment) Regulation 2022 which has redefined digital marketplace for VAT purposes. The proposed change was to shift the liability to account for VAT transactions on digital marketplace supplies to the non-resident provider of the services.

Services to be taxed in the digital marketplace will include software programmes, subscription-based media, downloadable digital content, tickets for live events, theatres, and restaurants as well as electronic data management and over-the-top services (streaming television shows, music, podcasts) (news, magazines, journals.)

As a result, the tech giant will act on behalf of the Kenya Revenue Authority (KRA) in collecting taxes from its customers. This is expected to see the price of its products and services increase, which might result in some being locked out, depending on the increase. 

Apart from collecting taxes, the company will also have to collect tax information in compliance with the local regulations. As a result, Google has resulted in informing their customers to provide KRA PIN numbers and to update them in their Google payment profiles, once these is done, customers should start seeing their PIN numbers on the invoices.

According to the tech firm, those who fail to provide their KRA PIN by 1^st February 2023 may experience challenges with invoice validity and possible implications for the recovery of the VAT costs, when entitled to claim.

Google, however, is not the only tech firm to be affected as other multinationals such as Netflix, Spotify as well as e-books and video-conferencing companies such as Zoom, have also started informing their customers on the impending VAT. 

The new regulation is an effort by the government to increase its revenue, whereby the President needs the tax authority to collect between Sh4 trillion and Sh5 trillion in the financial year ending June 2024.