KRA Comes For Kenyan Freelancers on Upwork
The repercussions of the newly imposed VAT tax rules
Recap
- KRA has imposed 16% VAT on all Upwork payments
- Freelancers are required to add their KRA pin to their profiles
- This measure follows the 16% tax Google imposed on goods and services in early 2023
Upwork is a freelancing platform where clients post jobs, and freelancers bid on them by writing proposals and using Connects to apply. Effective March 2023, freelancers in Kenya received a notice on their Upwork profiles requiring them to submit their tax information (KRA PIN).
This change proved drastic as fees charged on the platform have been tax-free since its inception, apart from the 10% Upwork service fee. Now, the client will have to pay the extra 16% VAT in addition to the agreed payment.
⚠️NB: VAT applies to services Upwork provides to both freelancers and clients if they reside, have a permanent address, or are established in Kenya.
Therefore, if you receive a payment of $100 for your service, the invoice will include an additional $16, a total of $116.
Ajira
In partnership with the Ajira Digital Programme, the government of Kenya spearheads the gig economy. By providing various virtual and on-site training, the youth are equiped with skills to find online work.
Consequently, they are encouraged to apply for online jobs using platforms like Upwork. With this measure in place, freelancers must keep that in mind when negotiating payment fees.
Two questions arise. Does the imposed VAT discourage youths from participating in training and applying for these jobs? Will this push Upwork clients away from hiring people from Kenya?
Also, will VAT be applied to other freelancing platforms in the future?
What Does VAT Apply to?
The VAT will not only be subject to service fees but also membership and buying of connects. Remember that tax is subject when signing up for an Upwork membership or buying connects to bid on projects.
Upwork follows Google, which imposed a 16% tax on all goods and services starting February 1st, 2023, in a bid for the Kenyan government to maximize revenue streams.
Filing Nil Returns
If you are a freelancer on Upwork and have been filing nil returns, that will no longer happen. With your tax information on the site, KRA will monitor all transactions and record the earnings over the financial year.
Therefore, you must remit all your earnings, pay income tax, and file tax returns.
Freelancers eligible for tax exemptions must provide a valid tax exemption certificate. Upwork will receive, verify the certificate, and stop charging VAT.
Conclusion
What do you think of KRA asking for your tax information? Are you willing to comply, or will you run away to other sites yet to have tax obligations?
Leave your thoughts in the comment section below.
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