Facebook To Charge 16% For Ads In Kenya From April

Facebook has announced plans to start charging Value Added Tax (VAT) on the sale of advertisements on its platform in Kenya starting 1st April 2021, meaning Kenyans are about to pay more for ads as compared to many other countries.

The announcement by Facebook compliance with the Kenya government’s Income Tax (Digital Service Tax) Regulations 2020, which came into effect on the 2nd January 2021. Digital Service Tax is charged at 1.5 percent on all sales.

For Facebook to charge 16 percent while remitting only 1.5 percent to the Kenya Revenue Authority will hit more on local businesses that rely on ads to increase sales and generate revenue.

“Beginning 1 April 2021, Facebook ads in Kenya are subject to a value-added tax (VAT) at the applicable local tax rate. This applies to advertisers whose ‘Sold To’ country on their business or personal address is set to Kenya and who haven’t confirmed that they’re advertising for business purposes.” The social media giant said in a notice to its Kenyan business partners.

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• Parliament Approves The Return Of VAT To 16%

The Kenya Finance Bill 2020 introduced a new Digital Services Tax on income from services provided through the digital marketplace in Kenya at the rate of 1.5 percent on the gross transaction value.

The DST applies to the income of a resident or nonresident person derived or accrued in Kenya from the provision of services through a digital marketplace. One will be subject to DST if one provides or facilitates the provision of a service to a user who is located in Kenya.

A user of a digital service is deemed to be located in Kenya if any of the following parameters are present; he/she accesses the digital interface from a computer or other electronic devices located in Kenya; payment for the digital services is made using a credit or debit facility provided by any financial institution or company in Kenya; the digital services are acquired using an internet protocol address registered in Kenya or an international mobile phone country code assigned to Kenya; and/or the user has a business, residential or billing address in Kenya.

The new tax will affect such digital services as streaming and download services of digital content; provision of a digital marketplace, website, or other online applications that link buyers and sellers; subscription-based media including news, magazines, and journals; electronic data management including website hosting, online data warehousing, file-sharing, and cloud storage services; Supply of search-engine and automated help-desk services including supply of customized search engine services; among others.