Facebook Introduces VAT in Kenya

Facebook has introduced taxes in Kenya effective April 1, 2021. The social media giant said these taxes will be applicable to advertisers whose ‘Sold To’ country on their business or personal address is set to Kenya and who haven’t confirmed that they are advertising for business purposes.

“Due to implementation of a value-added tax (VAT) in Kenya, Facebook is required to charge VAT on the sale of ads to advertisers that are not advertising for business purposes in Kenya,” it explained in a statement.

“All advertisers with a business country of Kenya who has not confirmed they are advertising for business purposes will be charged an additional 16% VAT on advertising services purchased after 1 April 2021.”

Facebook said not every Facebook account holder would be liable to a tax deduction but only those who meet the criteria.

In the Ad Accounts Settings of Ads Manager, Facebook said, “you can check the box to confirm whether or not you’re advertising for business purposes and responsible for self-assessing and paying VAT in accordance with the Tax Code of Kenya.”

If you confirm you are advertising for business purposes, Facebook said it “doesn’t add VAT to your purchase of Facebook ads.”

Facebook added that VAT would be added whenever you are charged for your ads if you’re not purchasing Facebook ads for business purposes.

“Because VAT is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold amount. If you pay for Facebook ads with a manual payment method, VAT is accounted for and applied at the applicable local rate when your ad account is funded to determine the total balance available.”

Last year, Kenya Revenue Authority (KRA) introduced the Finance Act 2020 Digital Service Taxes (DST) on income from services provided through the digital marketplace in Kenya and will be applied at 1.5 percent on the gross transaction value (exclusive of VAT).

In a public notice, the taxman noted that an increasing number of influencers do not file tax returns or pay taxes on transactions.

Several businesses have scaled up their presence in digital platforms where they now routinely conduct and conclude transactions.

In recognition of this shift, many jurisdictions around the world have in the recent past enacted tax legislation aimed at taxing the digital economy.

These Regulations aim at ensuring that VAT is charged on taxable services supplied in Kenya through the digital marketplace by Business to Customer (B2C) transactions.

Taxing digital market suppliers in the country became effective on January 2, this year, a move that will see the Kenya Revenue Authority (KRA) widen its revenue bracket.

Facebook now joins YouTube to deduct taxes for the US government from all channels, even those owned by creators who don’t reside in the United States of America.