The Finance Act 2023 introduced two types of digital economy taxes; Digital Content Monetisation and Digital Asset Tax that target persons who earn income online in Kenya. This affects bloggers, influencers, writers, eCommerce owners, and individuals earning income using platforms like TikTok, Facebook, Twitter, YouTube, Jumia, Amazon, Upwork, etc.
Digital Content Monetisation Tax Explained
Digital Content Monetization tax is paid by businesses or persons that pay users who have earned income online. You are required to pay digital content monetization tax if you pay any Kenyan online for;
- Advertising on their website or social media accounts
- Sponsorship or endorsement
- Affiliate marketing commission
- Membership or Subscriptions
- Sell of digital products like (logos, brands, eBooks, courses, software, photos, music, etc.)
- Crowdfunding
Digital Content monetization tax is paid at a rate of 5% (as withholding tax) if the payment was sent to a Kenyan resident and 20% if it is a Kenyan resident making payment to non-resident content creators.
The platform or person paying Digital Content monetization tax is required to withhold 5% before paying the individual. Withholding tax should be paid within 5 days of payment to the withholdee (content creator).
Content creators will be required to declare their income in the annual returns.
How to pay withholding tax (for content creators)
To pay withholding tax as a limited company or individual, follow the procedure below;
- Login to KRA iTax Portal
- Go to Payment registration
- Select Income Tax
- Then select Income Tax – Withholding Tax
- Select Self-Assessment
- Select Web Form or Download Excel form (if you have multiple people to pay)
- Select “Digital Content Monetization” as the nature of the transaction
- In the form, you will be required to provide the following details of the content creator you paid (Country, Date of Payment, Name, KRA pin, Email, Address, and amount paid)
- The form will auto-calculate the withholding tax that you are required to pay
- Click the “Add details” button, (you can add more than one creator payment details)
- Then submit form
- You are done.
Digital Asset Tax
Digital Asset tax is paid for sell of digital assets like cryptocurrencies, Intangible assets, token codes, and Non-fungible tokens (NFTs). Digital Asset tax is supposed to be submitted within 5 days of sending payment to the beneficiaries at a rate of 3%. Use the same procedure provided above but select digital asset tax. This tax shall be paid by the owner of the platform.
As a Kenyan resident/non-individual, you are also required to pay a turnover tax of 3% if your income is more than 1 million in a year and does not exceed 25 million. Turnover tax is paid before the 20th of every month
All the above taxes are now in operation.
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