Kenyan Courtroom Docket Says Collapsed Sendy Ought to Pay $635,000 VAT

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

In a landmark decision delivered on October 23, the Extreme Courtroom ordered Sendy to pay KES 82.2 million ($635,000) in value-added tax (VAT) to the Kenya Earnings Authority (KRA), ruling that the company wasn’t solely a digital intermediary connecting prospects to drivers, it was a service provider in its private correct.

Justice Helene R. Namisi found that Sendy “exercise routines a decisive diploma of administration over the essential elements of the provision service,” noting that it set phrases, authorised deliveries, and obtained funds in its private title. She mentioned that, for VAT capabilities, it meant Sendy had efficiently obtained the transport service from third-party drivers and offered it to the highest purchaser.

The selection overturned an earlier ruling by the Tax Appeals Tribunal, which had sided with Sendy’s argument that it was merely a platform provider and should solely pay VAT on its price. The Extreme Courtroom disagreed, saying the tribunal “erred in laws” by ignoring the enterprise actuality of how Sendy operated.

Sendy continues to be beneath administration, with the receiver supervisor however to complete the strategy. KRA may keep in mind seizing and auctioning a couple of of its belongings that haven’t been provided to repay collectors. The administrator couldn’t be reached for comment. 

Platforms beneath KRA’s radar

The implications go far previous Sendy. By treating the company as a principal in its transactions, the court docket docket has given the KRA a latest mandate to pursue completely different digital platforms that course of funds and administration key options of their ecosystems.

Which may embody ride-hailing firms equal to Uber, Bolt, and Little Cab, along with meals provide suppliers like Glovo, and on-line marketplaces like Jumia and Kilimall, all of which have prolonged maintained that they’re “know-how companies,” not service suppliers.

Beneath the ruling, VAT would apply to your total amount paid by prospects through a platform, not merely the price or service fee. That interpretation may improve the costs for platform firms.

The choice comes at a time when Kenya’s digital monetary system is booming. In accordance with the UN Conference on Commerce and Enchancment, e-commerce revenues are projected to realize KES 145.8 billion ($900 million) this 12 months, with over 12 million clients.