Latest digital tax news for international recruiters

Digital tax news

22nd January 2021

The world has become increasingly digital as virtual marketplaces and remote businesses and services become the norm. But with this increase to move online for many organisations comes a real challenge for international authorities: accurately monitoring and taxing digital marketplaces. Over the last few years, we’ve seen a rapidly increasing number of global authorities taking steps to drive tax compliance in online marketplaces. And while there is arguably still room for improvement, progress is being made.

We’ve seen the Organisation for Economic Co-operation and Development (OECD) reveal plans to include the exchange of data on virtual currencies in the Common Reporting Standard, and the European Commission has highlighted plans for its own digital taxes. And there are many other similar reports.

For international recruiters, this certainly makes compliance across borders more complex, as the borders themselves become blurred in an online world.

So, what digital tax news should recruitment firms be aware of?

Kenya’s digital tax

In Kenya, authorities have been taking steps to recover taxes from digital services, with the Digital Service Tax (DST) coming into force at the beginning of this year. Under the DST, businesses and individuals providing virtual services and trading digitally will be subject to a 1.5 percent tax.

While the remit of this is extensive – with mobile apps, ebooks and films being captured by the tax – it will also include remote support services and the provision of search engine services, instant feedback services and other online support functions. According to Nairobi News, the Kenyan Revenue Authority (KRA) also added that “licensing, sales and other forms of monetising data collected from Kenyan users, online training delivered through pre-recorded media or e-learning platforms and courses or any services provided through the digital marketplace, will attract the 1.5 percent tax.”

This latest news comes following the Kenyan Treasury’s budget in the summer of 2020 which had a focus on digital service taxation and revealed the details of the DST which has now come into force. According to reports, the regulations highlight the strict measures that will be taken should an individual or business fail to comply:

“A person who fails to comply with the provisions of these Regulations shall, in addition to the penalties prescribed under the Act, be liable to restriction of access to the digital marketplace in Kenya until such obligations are fulfilled.”

For recruiters placing contractors in Kenya, it is important to seek expert guidance in light of these changes as Kenyan authorities are taking a tough stance on non-compliance. And with some contract professionals still providing services remotely as the Covid-19 pandemic continues to restrict movement, some individuals could unknowingly be caught under the DST.

The UK and the sharing economy

In other digital tax news, in the UK the Treasury has requested stakeholder comments to its application of VAT on online platforms to better facilitate the sharing economy. While this is open for responses until March 2021, the Call for Evidence document shared by the Treasury highlights a number of interesting recommendations around the use of digital tools to monitor and mandate tax of the sharing economy.

According to the document, “there are several hundreds of thousands of underlying service providers active in the Sharing Economy in the UK, possibly millions. To monitor the compliance of each of these operators with VAT and wider tax rules, and to undertake enforcement action against them where they do not comply, could prove to be very resource-intensive and expensive for HMRC.”

In order to best drive compliance, the guidance suggests that tax authorities should collaborate with sharing economy digital platforms where possible, which would include the sharing of relevant data from these platforms to help better identify and prosecute non-compliance.

Digital tax news: constant compliance a must

The above examples are just two of the latest digital tax news stories that international recruiters need to be aware of and we certainly expect there to be many more in the future as global authorities continue to take steps to tax and manage the digital world.

As this trend continues, a recruitment firm’s ability to operate compliantly – and ensure its contractors are also working in line with local legislation – becomes increasingly complex. And with governments worldwide taking action to recover much needed funds in a difficult economy, we can certainly expect to see a continued stringent approach from many authorities.

In order to reduce the risks for your business, it’s advisable to seek out expert advice that is tailored to your firm’s unique situation. The 6CATS International team is always on hand to offer support and advice. With a team of some of the most experienced professionals in the sector, we have a wealth of knowledge to draw on and can advise on most countries around the world. Why not contact them today to find out more?

And don’t forget to follow us on our social media channels to stay ahead of the latest international tax developments.





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