Scribd
Upload
53 views15 pages

Taxation of The Digital Economy

Uploaded by

REJAY89
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
53 views15 pages

Taxation of The Digital Economy

Uploaded by

REJAY89
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 15

TAX PRINCIPLES AND EMERGING

ISSUES SEMINAR

Presentation by: Nickson Omondi


Taxation of the Digital Economy
Wednesday,17th Feb 2020

Uphold public interest


THE DIGITAL ECONOMY
Transfer Pricing and Digital Economy

TP Cycle Arm’s Length Principle

Transfer Pricing Adjustment Comparability Analysis

Transfer Pricing Methods


Digital Economy and
Challenges In taxation
• Physical presence
Basis of
Taxation • Supply side functional
analysis

• Mis-alignment between the place where


Digital Economy profits are taxed and the place where value
is created.

• Scale without mass


Digitalisation • Data utilization
Issues
• User interaction

• Restrictive nature of physical


Challenges in presence provisions.
taxing digital • Destination principle and low value
Economy goods trade
• Tracking transactions.
• characterization of income earned.
• Lack of consensus international
consensus.
Measures to Tax the Digital
Economy
1. Diverted profits tax (DPT) – address shifting profit offshore to avoid tax, e.g., IP
transfers; use of marketing hub models as used by UK and Australia.
2. Country by country reporting (C-b-C) – e.g., location of the economic activity
undertaken by the MNE group.
3. Digital Services Taxes (DST) – levied on gross revenue of digital companies with a
common theme of value created by users
4. OECD on; Nexus and profit allocation Rules ( BEPS Action 1 and the Unified
Approach); Pillar I and Pillar II
5. OECD’s Mechanisms for the Effective Collection of VAT/GST – Where the
Supplier is Not Located in the Jurisdiction of Taxation (OECD)
Pillar I- OECD proposed
Approach
✓Emanated from the wider 15 BEPS Action Plans
✓The Pillar one focuses on the “nexus” and “profit allocation”
✓Pillar II is focused on global minimum tax
✓Its is based on the premise of businesses able to generate profits through
participation in a significant/Active and sustained way in the economic
life of a jurisdiction- Nexus
✓Allocate a portion of in-scope businesses to market/user jurisdiction
also known as ( Amount A)
✓Make the allocation simple to minimize compliance.
✓Use of consolidated accounts welcome and ensure double taxation is
minimized.
✓Grant amount B to baseline activities such as marketing and
distribution activities using a fixed rate of return closer to arm’s length..
Pillar I Contd’
✓The whole process is expected to be concluded by
mid-2021 where model drafts legislation, guidelines
and international tax rules and processes will be done
to enable implementation on a consensus based
manner.
Digital Service Tax
DST shall apply to the income of a resident or non-resident person
derived or accrued in Kenya from the provision of services through a
digital marketplace.
Shall be offset against the
tax payable by that
Resident person or non- person for that year of
resident person with a PE income
in Kenya
Digital service
Tax paid (1.5%)

Non-resident person
Shall be a final tax
without a PE in Kenya
Services Subject to DST
• downloadable mobile applications, e-books,
Downloadable digital content films, movies, music and online games

• streaming television shows, films, music,


Over-the-top services podcasts and any form of digital content

Sale of, license of or any


other form of monetizing • has been generated from such users’ activities
data collected about Kenyan on a digital marketplace
users

Provision of a digital • e-commerce platforms and sharing economy


marketplace, website or other e.g Airbnb, taxi hailing services
online applications
• news, magazines and journals
Subscription-based media
Services subject to DST
. Electronic data management
• website hosting, online data warehousing, file-
sharing, cloud computing and cloud storage
services

• includes supply of customized search engine


Provision of search-engine and services – google etc
automated helpdesk services

• online sale of tickets for attendance at live


e-booking and e-ticketing services events, theatre, performance art and similar
entertainment activities

• via pre-recorded medium or e-learning, including


Online distance teaching online courses

any other service provided or delivered through


an online digital or electronic platform
Payment and Filing DST
1. The payment of Digital Service Tax & VAT on digital supplies shall be
the liability of:
❑ The digital service provider or digital marketplace provider.
❑ The supplier or intermediary (where an intermediary makes
a supply on a digital marketplace on behalf of another
person).
❑ The tax representative appointed by a non-resident person
without a permanent establishment.
2. A person liable to pay DST shall submit a return in the prescribed
form and remit the tax due by the 20th day of the following month
that the digital service or taxable supply was offered.

3. The filing of tax returns and payment of taxes due shall be in the
prescribed form, i.e. via the KRA revenue collection system – iTax.
DST Exemptions
1.DST shall not apply to income taxed under the provisions of
section 9(2) and section 35 of the Income Tax Act.
2. Online services which facilitate payments, lending or
trading of financial instruments, commodities or foreign
exchange, carried out by:
A financial institution specified under the Fourth
Schedule to the Act; or
A financial service provider authorized or approved by
the Central Bank of Kenya,
3. Online services provided by Government institutions.
DST Emerging Issues
• DST and Witholding Tax, which one Takes
Preference
• Issues around DST and Double Tax Treaties
• How does DST interact with Minimum Tax
• DST and Turnover Tax.
• What happens to DST when the OECD unified
approach is adopted.
DST Emerging Issues
• DST and Witholding Tax, which one Takes
Preference
• Issues around DST and Double Tax Treaties
• How does DST interact with Minimum Tax
• DST and Turnover Tax.
• What happens to DST when the OECD unified
approach is adopted.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy