Kenyan court docket says collapsed Sendy should pay $635,000 VAT

Sendy, the Kenyan logistics startup that went into administration in 2023, has discovered itself on the centre of a ruling that would reshape how Kenya’s gig financial system is taxed.

In a landmark resolution delivered on October 23, the Excessive Courtroom ordered Sendy to pay KES 82.2 million ($635,000) in value-added tax (VAT) to the Kenya Income Authority (KRA), ruling that the corporate wasn’t only a digital middleman connecting prospects to drivers, it was a service supplier in its personal proper.

Justice Helene R. Namisi discovered that Sendy “workout routines a decisive diploma of management over the important parts of the supply service,” noting that it set phrases, authorised deliveries, and obtained funds in its personal title. She said that, for VAT functions, it meant Sendy had successfully obtained the transport service from third-party drivers and provided it to the top buyer.

The choice overturned an earlier ruling by the Tax Appeals Tribunal, which had sided with Sendy’s argument that it was merely a platform supplier and may solely pay VAT on its fee. The Excessive Courtroom disagreed, saying the tribunal “erred in legislation” by ignoring the business actuality of how Sendy operated.

Sendy continues to be beneath administration, with the receiver supervisor but to finish the method. KRA might take into account seizing and auctioning a few of its belongings that haven’t been offered to repay collectors. The administrator couldn’t be reached for remark. 

Platforms beneath KRA’s radar

The implications go far past Sendy. By treating the corporate as a principal in its transactions, the court docket has given the KRA a recent mandate to pursue different digital platforms that course of funds and management key features of their ecosystems.

That might embody ride-hailing companies equivalent to Uber, Bolt, and Little Cab, in addition to meals supply providers like Glovo, and on-line marketplaces like Jumia and Kilimall, all of which have lengthy maintained that they’re “know-how corporations,” not service suppliers.

Beneath the ruling, VAT would apply to your entire quantity paid by prospects via a platform, not simply the fee or service payment. That interpretation might enhance the prices for platform companies.

The decision comes at a time when Kenya’s digital financial system is booming. In accordance with the UN Convention on Commerce and Improvement, e-commerce revenues are projected to achieve KES 145.8 billion ($900 million) this 12 months, with over 12 million customers.