Content creation is a fast-growing segment of the Kenyan economy, providing many, especially the youth, with an alternative source of income as they leverage engagement with their fan bases on social media platforms.
In the run-up to the Finance Bill, 2023, this segment of the economy was the focus of much attention following a proposal to revise its withholding tax rate from 15 per cent to 5 per cent. While the National Assembly ultimately supported the retention of the 5.0 percent rate, this has brought the operating environment of content creators into the limelight.
Just like any other business or career, there's an initial investment required to get started as a content creator. A content creator starting out needs at least a mobile phone with an exceptional camera quality (megapixels) to achieve the required video quality. A device will cost between Sh50,000 and Sh200,000, depending on the desired outcomes and budget constraints. By the end of March 2023, there were 62.9 million registered mobile phones in Kenya, with 29.5 million smartphones.
Once a reliable mobile phone device has been secured, a ring light is needed for lighting, which helps to illuminate the face during video recording. A standard ring light costs between Sh5,000 and Sh10,000, depending on the specifications.
Sound quality is the next priority and this is largely dependent on lapel microphones, which on average cost between Sh3,000 and Sh5,000. It is important to note that video quality and sound quality are paramount in content creation and this explains why the mobile phone device, ring light and microphones dominate the focus of content creators.
Editing software and a laptop or desktop computer could be an additional cost, but increasingly most mobile phones come with built-in editing applications.
Uploading content requires internet bundles or Wi-Fi connectivity and is one of the main recurring costs for content creators. Some content creators choose to add post-production enhancements to their videos, which may require professional editing to add certain effects. This could be a recurring cost. A number of content creators have indicated that it could take up to an hour of filming to produce a two minute video.
All income earned will be subject to a 5.0 per cent withholding tax as an advance tax. Advance tax means that over and above the 5.0 per cent paid to the Kenya Revenue Authority, the content creator is expected to ensure that their tax payment, net of expenses, adds up to 30.0 per cent at the end of the financial year.
Suppose a content creator secures a job and agrees to be paid Sh100,000. The person who procured their services will pay them Sh95,000 and remit Sh5,000 directly to the KRA as withholding tax. The content creator is then required to remit the remaining 25.0 per cent to KRA after deducting his expenses. These expenses must be strictly related to the costs incurred in providing the specific service and must be supported by verifiable documentation.
When a content creator uploads content to YouTube, monetisation implies a 55/45 revenue split between them and Google. In addition, from June 2021, if a content creator creates content aimed at the US audience, all revenues processed through Google AdSense will be subject to a 24% tax to be paid to the US government. AdSense is a service operated by Google that enables content creators to monetise what they publish on the platform.
