New VAT tax charge ups local Netflix rates

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Netflix
PHOTO/COURTESY

Global streaming service Netflix has increased the local rates for its standard and premium packages after introducing a Value-Added Tax (VAT) charge in its billing.

The Netflix standard package will from the end of May retail at Ksh. 1,100 in Kenya up from Ksh. 950 while the premium package will increase by Ksh. 250 to Ksh. 1,450. The service’s basic package will not be affected by the price hike and will remain at Ksh. 700

 “Starting May 30, a value-added tax (VAT) will be included in your Netflix price,” read the company’s message to a subscriber.

In early January, the Kenya Revenue Authority (KRA) added the Digital Service Tax (DST) to the Income Tax Act (ITA) and the Value Added Tax Act (VAT). The VAT (Digital Service Tax) relates to provisions made in the online market at the average rate when offered in Kenya while the Income Tax levy (DST) stipulates that all businesses that offer products and services such as music, movies, e-books, and games online will pay a flat tax of 1.5 percent on the price of goods and services offered digitally.

The availability of affordable, reliable, and easily accessible internet as well as Covid-19 disruptions which have made consumers prefer e-commerce over physical shopping has seen the uptake of online video and e-commerce platforms in Kenya increase significantly.

In an effort to increase its overall tax base, the KRA has in recent times been eyeing businesses and persons who make a living by selling goods and services online. The taxman is optimistic that the Covid-19 disruptions will scale tax collection in the sector by approximately Ksh. 5 billion in the six months to June owing to improved uptake of online platforms since the Covid-19 pandemic hit.

According to latest data from the Communication Authority of Kenya (CA), mobile data subscriptions in the country stood at Ksh. 44.1 million in the first six months of 2020. The upturn has been attributed to increased consumption of online services, increased population coverage of 3G and 4G networks as well as the availability of affordable smartphones in the country.

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