https://x.com/KBCChannel1/status/1866812800095621608
The Bill proposes to deem income paid by a resident or non-resident person, being the owner or operator of a digital marketplace or platform in respect to digital content monetization, goods, property or services to be income accrued in or derived from Kenya. Such payments shall attract withholding tax at the rate of five percent (5%) for residents and twenty percent (20%) for non-residents. Further, in our view, the non-resident owners of platforms will be required to register for tax purposes in Kenya which will require regulations. The problem with this proposal as drafted is that it implies a situation where non-residents may be deemed to have made taxable income from Kenya even when dealing with other non-residents and this requires clarification.
implication…
Increased Cost of Doing Business:
- For digital content creators, service providers, or sellers of goods on platforms like YouTube, Facebook, or e-commerce websites, this tax will reduce net earnings, potentially affecting their profitability and ability to reinvest in their businesses.
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- As a non-resident platform earning income from Kenyan freelancers, Upwork will likely be required to pay the 3% SEPT on its gross turnover attributable to Kenya.
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- This could increase operational costs, especially given Kenya’s reduced tax competitiveness compared to other countries.
- Potential Changes in Fees:
- Upwork may pass on these costs to Kenyan users (freelancers and clients) by increasing service fees or transaction charges.
- Risk of Reduced Services:
- If compliance costs become prohibitive, Upwork might reduce its offerings or limit access to Kenyan users, negatively impacting local freelancers.
- Limited Incentive for Investment:
- The higher tax burden and administrative complexity might discourage Upwork from setting up a permanent establishment in Kenya, which would exempt them from SEPT.