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How the Govt is starting a ZOOM VAT

Zoom service has found prominence since the onset of the Covid-19 pandemic, becoming the most used video conferencing application in the world for all sorts of Businesses and companies. As offices and learning institutions were closed in Kenya due to the pandemic, Zoom became the go to platform for everything for business meetings. Several businesses have scaled up their presence in digital platforms like zoom where they now routinely conduct and conclude transactions.

Businesses in Kenya using Zoom’s paid level will have to dig deeper into their pockets to use the video conferencing service for their meetings, after the firm announced that it would begin charging Kenyan VAT “on August 1, 2021” on its supplies to customers in Kenya.

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Zoom is registered for VAT in Kenya as a non-resident supplier of electronic services. As such, Zoom is required to collect and remit VAT on supplies made to non-VAT registered customers in Kenya. This will mostly affect developing corporates and MSMEs who had the efforts of trying to maintain their workflow despite the pandemic at hand, since they are the ones who usually pay for Zoom services. The move is mostly of importance to businesses who use Zoom regularly. Users with basic accounts that can host a maximum of 100 participants per meeting, do not pay for the service.

Zoom founder and chief executive Eric Yuan said the company was converting more and more businesses to paying customers, as they adapt to “a new world of work from anywhere”.

The firm highlighted its growing international presence and the need to meet its indirect tax collection and remittance obligations. “The application of these taxes to businesses with online activities is a complex and evolving area. Zoom continues to review such developments, as well as the nature and extent of its activities in different administrations and based on such regular review they will start charging indirect taxes where applicable.”

While many Kenyan users of Zoom use the basic plan which is free, many businesses among other organizations and governmental agencies pay between $150 and $240  for licenses.

The premium plans offer perks including the ability to host up to 1000 participants in a meeting, social media streaming, cloud storage and longer meeting times unlike the Basic Plan which has a 40-minute time limit for group meetings. The free plan for SMEs is proving to be a great way to improve communication, reduce costs and improve productivity. Just like the main players, SMEs have improved way of communicating with suppliers, customers, and clients in an open and honest way, with face-to-face conversations helping to build trust and loyalty in these business relationships.

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 per cent on the gross transaction value.

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 KRA widen its revenue bracket.

SMEs in Kenya will now have to register or turn to other alternatives to enable meetings and conferences of workers if at all they are non VAT registered customers. Others will have to try new ways to create income enough to survive the zoom VAT charges as long as they use them. The surge has lifted revenue and profits for the zoom application but has sent the SMEs stock soaring.

Mombasa, Kenya.

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