Professional social network LinkedIn has increased the subscription rate across all its products for users in Kenya. This is due to the recent 16% VAT on digital transactions implemented by the Kenya Revenue Authority (KRA) in January 2022.
This digital tax is the outcome of the newly revised global tax framework to reflect the digitization of the global economy. The new framework which was championed by the Organisation for Economic Co-operation and Development (OECD) in October 2021 reached two major agreements: it gave rights to countries to impose taxes on big tech companies like Facebook, Google etc provided they have users and customers in those countries. It also introduced a global minimum corporate tax rate of 15% on earnings.
In response to this, LinkedIn sent out a communique to its users saying “We want to provide you with an important tax update related to Kenya tax that will impact your LinkedIn purchase(s). Kenya has introduced a tax of 16% on e-Services. In order to comply with these laws and regulations, this tax will be added to your current LinkedIn purchase starting on May 11, 2022.”
The communique added that “if a valid Kenya tax number has been provided, this will be accepted by LinkedIn as notification of your responsibility to account for VAT under the reverse charge mechanism.”
With the new rates which took effect from May 11, LinkedIn users in Kenya on the Recruiter Lite account moved from paying $79 to $92; Sales Navigator users now pay $75 as against the previous $64; Premium Business subscribers also experienced an increase from $38 to $44; while the Career Account added a meagre $4 from $24 per month to $28.
The importance of the tech ecosystem to the Kenyan economy and the government’s revenue generation efforts cannot be overemphasized. With earnings from digital transactions by multinationals in Kenya estimated to be worth around Sh226.67 billion ($1.95 billion) according to the KRA.