Covid-19: KRA warns against tax evasion as digital trade grows

Online retail businesses became the subject of taxation in 2019, following amendments to the Finance Act, which sought to clarify that income from digital transactions attracts VAT. PHOTO | COURTESY 

In Summary

• Domestic Taxes Commissioner Elizabeth Meyo directed business owners trading on digital platforms to charge Value Added Tax (VAT) on their transactions and remit the taxes to the KRA.
• Online retail businesses became the subject of taxation in 2019, following amendments to the Finance Act, which sought to clarify that income from digital transactions attracts VAT.

By ANTHONY KITIMO
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As most businesses adopt online business platforms and cashless transitions to curb the spread of coronavirus, the Kenya Revenue Authority (KRA) has warned traders against evading taxes.

Through a public notice, Domestic Taxes Commissioner Elizabeth Meyo directed business owners trading on digital platforms to charge Value Added Tax (VAT) on their transactions and remit the taxes to the KRA.

While noting that the authority had learnt of an increasing number of tax evaders, Ms Meyo warned of criminal proceedings against all culprits.

"Some of the digital market place owners and the persons trading through such platforms have been found not to honour their tax obligations. We would like to inform such persons that they are obliged, under VAT Act, 2013, to charge and remit VAT on all sales and commission charged," she said in the notice.

The commissioner noted that failure to comply results in penalties and interest on outstanding taxes which may be determined during compliance checks.

ONLINE TRADE

Online retail businesses became the subject of taxation in 2019, following amendments to the Finance Act, which sought to clarify that income from digital transactions attracts VAT.

In recent months, there has been an increase in online trading involving the importation and local distribution of products such as electronics and kitchenware.

The idea has been well accepted due to its convenience following restrictions to curb the spread of the coronavirus.

Businesses including supermarkets have joined online trading platforms and have been promoting delivery services.

BOOST

The business got a boost in March after the Central Bank of Kenya announced a raft of measures to facilitate increased use of mobile money transactions instead of cash.

This came after President Uhuru Kenyatta appealed to Kenyans to use mobile money and card payments instead of hard currency as part of efforts to contain Covid-19.

To facilitate this, the apex bank removed charges on transactions of up to Sh1,000 and increased the transaction limit for mobile money to Sh150,000/

The CBK increased the daily limit for mobile money transactions to Sh300,000 while the monthly total limit was eliminated.