By Frank Kamuntu
The government of Kenya has proposed amendments to the Income Tax Act to increase tax collections from the digital economy.
The digital economy in Kenya has gained traction in recent years as a major source of income for many Kenyan youths.
As a result, the government previously made attempts to include income made from digital spaces in the tax brackets; however, the legal definitions relating to the digital economy have been vague.
The proposed Finance Bill 2024 aims to amend the Income Tax Act by further defining the digital marketplace.
What Is A Digital Marketplace?
The Income Tax Act says that a, “digital marketplace” means an online or electronic platform which enables users to sell or provide services, goods or other property to other users.”
If the proposals in the Finance Bill 2024 are passed into law, the definition in section 3 of the Income Tax Act will be amended to enhance the definition of a digital marketplace.
The Finance Bill 2024 states that, Section 3 of the Income Tax Act is amended in subsection (3), by deleting paragraph (ba) and substituting therefore the following new paragraph- (ba) “digital marketplace” means an online or electronic platform which enables a person to sell or provide goods, property or services including-
- (a) ride-hailing services;
- (b) food delivery services;
- (c) freelance services;
- (d) professional services;
- (e) rental services;
- (f) task-based services; and
- (g) any other service that is not exempt from tax under this Act.
Implications Of Finance Bill 2024 On Kenyans Earning From Digital Services
The implication is that the government will have a legal basis to tax income earned by taxi drivers and taxi companies offering services through online platforms, for example, Bolt Uber Faras Little and other ride-hailing services.
Additionally, income made from delivering foods ordered online will be subject to taxation by the government.
Due to Kenya’s high unemployment rates, many youths have turned to freelance and task-based online jobs for income.
Therefore, the finance bill ensures the government comprehensively covers income made from online platforms such as Remotasks, Fiverr, Upwork and other freelance platforms.
These include services, such as online writing graphics designs, research and survey transcription and caption, and many others.
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