Kenyan Creatives to Incur Tax on YouTube Content

The United States will start Withholding Tax on Income Earned by Non-residents from the US Viewers through YouTube Premiums, Ad Views, and Super Stickers as at June 2021.

The Covid-19 pandemic took a toll on the economy globally.  In underdeveloped countries, donations and loans have played a major role in supporting the livelihoods of their citizens. Most countries have reviewed their tax regulations and made amendments in order to address these macro-economic factors. Currently, countries are putting the remaining pieces together on their roads to economic recovery.

Many businesses have relied on technology in order to run their operations. This has seen many inventions arising from digital platforms. As a result, there has been tremendous growth in the number of transactions that are concluded via the digital platform.

With the growth in the digital economy, a good number of tax authorities have had to factor changes to suit the prevailing market changes. There has been a massive transformation from the traditional taxation methods to more advanced and modern world taxation techniques.

We have seen many governments address the taxation of the digital economy, with Kenya fully joining the bandwagon in 2021. The new regulations guiding the Digital Service Tax (effective 2021) have been published and are in circulation across various platforms in a bid to educate the public.

Currently, Google Inc., which is a US entity, has taken the center stage in the digital transformation. This is seen through the immense dependence by many on its products and services such as the YouTube platform.

Switching our focal point to the US, quite a lot has happened, ranging from the devastating impact of Covid-19, the recent presidential elections, etc. However, the USA has also been keen on tapping of revenues earned from the US by non-residents or those owning alien residency in the state. Through the Internal Revenue Code Chapter 3, there is need to collect tax information from all the USA non-residents who are monetized content creators who earn revenues from the viewers in the United States from YouTube Premium, Ad views, Super stickers, super chat etc.

As a result, Google Inc. will be required to deduct US taxes from payments advanced to creators outside the US starting June 2021. In order to seamlessly withhold these taxes on behalf of the United States government, people across the world are required to submit their tax information in order to determine the correct amount of taxes to be deducted. This is because for those who will not submit such information, Google will have to deduct tax on their total income earned across the world at a rate of up to 30%, depending on their actual tax residence countries.

What taxpayers need to understand is that non-residents in the US are required to hold an ITIN (Individual Taxpayer Identification Number) for tax processing purposes. This is because the residents use their SSN (Social Security Numbers) for compliance with the US tax laws and thus needless to acquire an ITIN.

The information provided by the taxpayer shall be considered in evaluating the amount of tax to be deducted from a taxpayer. Also, the individuals earning revenue via these digital platforms shall be taxed only on income resulting from the USA viewers only. Where there is a Double Tax Avoidance Agreement between the countries of residence of an individual with the USA, then the rates provided under these agreements shall be used in determining the actual tax to be deducted from their total earnings.

We wish to inform taxpayers operating in the digital space to take note of these changes and be ready to declare their tax information to Google for purposes of tax deducted on income earned from the US viewers. In addition, taxpayers are encouraged to be aware of all the conditions and obligations around the Digital Service Tax in Kenya.