Kenya is preparing a policy that could tax Over the Top (OTT) non-resident organisations, including the likes of Netflix and Hulu, subscription-based services that charge users on a monthly basis.

Speaking at an online tax forum organised by the Kenya Revenue Authority (KRA), Githinji Gathirwa, manager at the policy unit in KRA, said that the challenge with taxing non-resident organisations is their visibility at the point of payment.

"KRA will come up with guidelines to address taxation of non-resident organisations that make money from Kenyans online, like Netflix," said Gathirwa.

The comments have been made in the wake of a recent push by government to strengthen control over e-commerce operators – particularly those who fail to file tax returns or pay the exchequer.

On 3 May 2019 the KRA issued a warning to digital operators and "all individuals who sell products through e-commerce platforms" to declare their revenue and pay tax.

"Kenya Revenue Authority has noted that some taxpayers engage in online business and they do not file returns or pay taxes on the transactions. KRA would like to advise that unless income or supply is expressly exempt in the law, appropriate taxes should be paid," the tax authority stated.

It added that: "KRA would therefore like to remind the taxpayers that the self-assessment regime requires them to file and pay taxes which may include: VAT, Excise Duty, Withholding tax, PAYE, Corporate taxes and any other tax obligation required under the business."

Timothy Munene, a representative of the Online Professional Workers Association of Kenya said: "The digital space is the future, as online entrepreneurs we can only grow if we are recognised as formal entities and the business environment is friendly for us."

He urged the authority to introduce "friendly taxes for online traders" to help ensure compliance.

It is not the first time that Kenya's government has targeted OTT operators.

In 2016, authorities introduced the Film, Stage Plays and Publication Act 2016 to regulate content from the likes of Hulu and Netflix.

However, the legislation has to date not been implemented.