Apple, Microsoft and LinkedIn have started charging their users in Kenya a 16 per cent value added tax (VAT) on their products, a year after the country enacted regulations that pave way for the collection of the tax.
In April last year, top global firms offering digital services in Kenya started to raise their charges after the six-month window foreign firms selling their digital services locally had been given to start remitting the tax to the Kenya Revenue Authority (KRA) elapsed.
The foreign firms were given until April 8 last year to start remitting the VAT on their products following the gazettement of the VAT (Digital Market Place Supply) Regulations, 2020 in October of that year by National Treasury Cabinet Secretary Ukur Yatani.
The regulations,which were passed in February last year, operationalised the collection of VAT on digital marketplace supplies as enshrined in the Value Added Tax Act, 2013 by providing clarity on who is liable for paying the VAT as well as providing a simplified VAT registration regime for non-residents liable to VAT in Kenya.
Microsoft has now acted by increasing the subscription cost of its services such as Windows apps, OneDrive, Outlook, Microsoft Teams, OneNote and Skype, which is forcing their users in the country to pay more in subscription charges for the services whose importance is ever rising due to increased digitisation.
For instance, the cost of its standalone OneDrive cloud storage service that offers users cloud storage of up to 100 gigabytes (GB) has increased to $1.99 (Sh231) per month up from $1.72 (Sh200).
American tech giant Apple has also increased the pricing of its services such as Apple Music, News+ and iCloud storage due to the tax.
For instance, the cost of Apple Music’s Family subscription package has increased to $4.99 (Sh580) per month up from $4.30 (Sh500).
At the same time, jobs advertising site LinkedIn has also increased membership fees and rates that viewers pay to access content by up to Sh1,400 per account. LinkedIn offers four packages—career, business, sales navigator core, and recruiter lite— whose rates range from Sh3,200 to Sh10,719 per account.
“We want to provide you with an important tax update related to Kenya tax that will impact your LinkedIn purchase(s). Kenya has introduced tax at 16 percent on e-Services. In order to comply with these laws and regulations, this tax will be added to your current LinkedIn purchase starting on May 11, 2022,” LinkedIn said.
The firms now join Netflix, Meta, Zoom and Google in charging the tax, pushing up the cost of digital services. Social networking giant Meta last year increased the cost of advertising on its Facebook platform in April last year hitting thousands of individuals and businesses that rely on the app for advertising.
Streaming giant Netflix also reviewed its rates to Sh1,100 ($10.30) from Sh950 ($8.90) for the standard package and Sh1,450 ($13.58) from Sh1,200 ($11.24) for the premium package.
VAT is the second such tax—in addition to the digital services tax (DST)—that the government is betting on to raise its annual revenue targets to narrow the budget deficit at a time the country is heavily borrowing to finance its annual budget.
The entities are also paying the DST—charged at 1.5 per cent of the gross value of each transaction—a blow to consumers at a time demand for digital services has shot up including online teaching and learning, video streaming and gaming. BY DAILY NATION