KRA To Tax Mobile Applications Downloaded On Your Smart Phone

Just when the young, jobless Kenyan thought they have found a way to fend for themselves without depending on employment or any government tenders, Kenya Revenue Authority (KRA) drops yet another bombshell on taxation.
KRA has said it will tax applications downloaded in Kenya directly and indirectly. According to the taxman, owners of these applications should pay VAT on downloads, on top of other taxes under Section 3 of the Income Tax Act.

Just to flex a muscle, KRA has termed these businesses as non-exempt from taxes. Firms earning more than Ksh5 million annually are required to register for VAT obligations for supplies and will also pay corporate tax at 30 percent and 37.5 percent for residents and non-residents respectively.

In case an application is not yet earning the capped amount, they are also eligible to a presumptive tax of 15 percent of the annual single business permit fee or a 3 percent monthly turnover of the gross receipts through the Finance Bill 2019.

This comes at a time KRA is battling betting firms for failing to pay taxes over the years of operation in Kenya. This friction between the firms and the taxman has seen major companies like Sportpesa close shop as some struggle to put their heads above the water in court suits and hearings.

Betting has slowly been rising as a source of income in Kenya especially for the jobless with some of these gamblers building a fortune from the few coins. Agents and betting shops are just some of the ways both educated and uneducated Kenyans have found employment in the betting sector.

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Killing Innovation

Employment in Kenya is almost a privilege for graduates and even the semi-skilled. Since the internet, many of these young citizens have opted to work virtually with some even getting foreign jobs and contracts through apps. I once overheard a young man disregard reading of Kenya’s budget saying it would hardly make any impact since he works in the United Kingdom. Not physically, but virtually.

From cab-hailing, writing, transcribing, brokerage, Forex, web developing, acting, I could go on and on. These jobs actually exist and put bread on the table for thousands of Kenyans if not millions. Working through these applications does not mean tax is not applicable. In fact, taxation depends on the contract you land. By going further to tax downloads and revenue earned, this will lead to stringent work restrictions if not total withdrawal by app owners.

Just like a silent rule works, the digital community can agree no one owns the internet, and no one owns any opportunities in it. In recent years, Uber and Bolt (formerly Taxify) have been on the taxman’s radar with claims that these entities have violated tax requirements and that they risk closure.

In a country where the KRA Commissioner General is reported to abscond tax together with his officials sitting on the high floors of times tower, it really is greed for KRA to go after the new day employer; the internet. Even worse, tax funds meant for development seem to disappear mysteriously in the hands of both the taxman and legislators.
Adhering to tax requirements is a good citizen trait, as our slogan goes, “Tulipe Ushuru, Tujitegemee” however at this point, the government is depending on the citizen way too much as funds get embezzled in broad daylight in the eyes of Kenyans languishing in poverty.

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Privacy Breach

In the case the National Assembly approves the “Multilateral Convention on Mutual Administrative Assistance in Tax Matters”, a treaty that enables it to exchange and get specific data on tax evaders across the world, KRA has promised to dig deep into your data.

KRA has said it will be working with Communications Authority (CA) to track down transaction data by resident and foreign-based app developers operating in Kenya. The taxman has threatened to use its intelligent technological systems to spy on transactions by businesses and homes in a bid to reach Ksh6.1 trillion target by June 2021.

“Working with the Communications Authority, we should be able to get the data. But we live in a self-assessment period and expect that if you are generating revenue of that much, you self-declare so that you don’t pay extra penalties,” said Maurice Oray, deputy commissioner for corporate policy

Gathoni Kuria

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