Late last year, the Kenya Revenue Authority announced 2 new taxes in addition to the existing taxes in a bid to bring into the net more taxpayers. The points below are adapted from the KRA sensitization and guidelines towards explaining the 2 taxes and comprehensively answer the most frequently asked questions.
What is Minimum Tax?
Minimum tax is a base income tax that is payable by all persons conducting a business regardless of making a profit or a loss.
What is the Rate of Minimum tax?
It is 1% of the gross sales or turnover of the company. So, for example, your total sales or turnover before you remove your expenses is 100,000.00, you pay 1% of 100,000 which is 1,000.00 to the KRA.
What is the effective date of Minimum tax?
Minimum tax comes in to effect from 01/01/2021.
When is it due for filing and paying of tax?
The tax shall be payable in installments and due on the 20th day of each period falling on the 4th, 6th, 9th and 12th month of the year of income.
Is installment tax still applicable and payable?
Yes, where the installment tax payable by a person is higher than the minimum tax, then the person shall pay installment tax.
However, where the minimum tax is higher than the Installment tax, then the minimum tax will be payable.
What Incomes are exempted from minimum tax?
- Income exempted by the act.
- Employment income
- Income subjected to rental income tax
- Income that is subject to turnover tax.
- Income subject to capital gains tax.
- Income from extractive/mining industry.
What Is the benefit of paying the minimum tax?
It will serve as an equal playing field for all the taxpayers, basically to broaden the income tax base.
DIGITAL SERVICE TAX(DST):
What is Digital Tax:
Digital Service Tax is tax payable on income derived or accrued in Kenya from services offered through a digital marketplace.
Digital Marketplace is a platform that enables direct interaction between buyers and sellers of goods and services through electronic means.
When is DST effective?
Digital Service tax comes in to effect from 01/01/2021.
What is the rate of DST?
DST is 1.5% of the Gross transaction value.
What is the due date for DST?
DST is due at the time of the transfer of payment for the service to the service provider.
Is DST a final tax?
For residents and companies with a permanent establishment in Kenya, the DST will be an advance tax that they will offset against the income taxes due in the course of the financial year.
For non-residents and companies without a permanent establishment in the country the DST will be the final tax.
How will KRA collect the DST?
The tax will be collected and remitted by agents appointed by the commissioner of Domestic taxes.
For Oversees companies operating on a digital market space who do not have physical offices in Kenya, such companies will be required to appoint local tax representatives who will account for and remit the tax on their behalf.
Benefits of Digital Sales Tax.
Collection of DST aims to
- Address the changing business models and
- Expand the tax base and ensure equity, fairness and neutrality in taxation between traditional methods of doing business and new ways of transacting over digital platforms.
For more clarification or personalized sensitization/Training on the above taxes get in touch with us at firstname.lastname@example.org or 0712812812 / 0732812812.