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KRA targets online businesses in tax evasion crackdown

Friday May 10 2019

 digital economy

The KRA has singled out taxation of the emerging digital economy as a major risk to meeting the Sh6.1 trillion target. FILE PHOTO | NMG 

CONSTANT MUNDA
By CONSTANT MUNDA
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The Kenya Revenue Authority (KRA) has set sights on businesses using the Internet to market and sell products in a renewed bid to reduce revenue leakage through tax evasion.

The taxman says some of the businesses, which have invested in online channels to provide services and drive sales were neither paying taxes nor filing annual returns.

“KRA would like to advise that unless income or supply is expressly exempt in the law, appropriate taxes should be paid,” the agency said in a statement.

"KRA would, therefore, like to remind taxpayers that the self-assessment regime requires them to file and pay taxes."

Firms with annual revenue of more than Sh5m are under the law required to register for value-added tax (VAT) obligation. This will see them charge the standard 16 percent tax on supplies, among other taxes, and remit the same to the taxman.

SPYING ON TRANSACTIONS

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Those that generate less than Sh5 million a year are, on the other hand, obligated to pay presumptive tax at the rate of 15 per cent of the annual single business permit fee issued by a county government in a law enforced in January this year.

The taxman said earlier in the year it has invested heavily in intelligent technological systems capable of spying on transactions by businesses and homes.

Online businesses do not, however, have physical addresses or legal structures in the jurisdictions they operate, making it easy to escape the taxman’s noose as well as counties which issue business permits.

The KRA has singled out taxation of the emerging digital economy, a headache for global revenue agencies, as a major risk to meeting the Sh6.1 trillion target in the three-year period through June 2021.

“The digital economy … comes with its own set of challenges, including new business models built on mobile and Web-based transactions,” the agency says in the corporate plan for the period.