Subscription video-on-demand service Netflix has increased its monthly charges in Kenya effective May 30 after the company included in its billing a value added tax charge.

Netflix has reviewed its rates to Ksh1,100 ($10.30) from Ksh950 ($8.90) for the standard package and Ksh1,450 ($13.58) from Ksh1,200 ($11.24) for the premium package.

The price hikes do not affect subscribers under the basic plan currently paying Ksh700 ($6.56).

“Starting May 30, a value-added tax (VAT) will be included in your Netflix price,” reads the company’s message to a subscriber.

The Digital Service Tax (DST) in Kenya came into force on January 1 and was introduced to both the Income Tax Act (ITA) and the Value Added Tax Act (VAT).

Both Acts prescribe that DST shall be payable by a person whose income is earned in Kenya from the provision of services through a digital market place.

The VAT (Digital Service Tax) applies to supplies undertaken in the digital marketplace at the standard rate when supplied in Kenya.

Under the Income Tax (Digital Service Tax), all businesses selling services online are expected to pay a flat tax of 1.5 percent on the value of goods supplied and sold online or services offered through digital platforms.

Services and goods that fall under this tax bracket include e-books and movies, music and games, tickets for live events and theatres, subscription-based media including news, magazines, and digital content.

Online video platforms have become a popular alternative for consumption of programming with their adoption fuelled by improved internet access and Covid-19 disruptions that have driven ecommerce.

The Kenya Revenue Authority (KRA) is targeting businesses and persons under the new digital taxes selling services and goods online.

The taxman is banking on the Covid-19 disruptions that have accelerated the use of online platforms to sell goods and services to raise Ksh5 billion ($46.8 million) from the sector in the six months to June.

The latest data from the Communications Authority (CA) shows that mobile data subscriptions in Kenya stood at 44.4 million in the second quarter of 2020.

Factors driving this growth include increasing population coverage of 3G and 4G networks, availability of affordable smartphones and data plans. It is also attributed to increased consumption of e-commerce, e-government, social media and other online content.