Fintech giant M-Kopa has been ordered to pay KSh 885.87 million in taxes by the Tax Appeals Tribunal in a landmark ruling on tax jurisdiction.
- •The tribunal’s decision came after M-Kopa failed to provide evidence proving its place of effective management was based in the United Kingdom (UK).
- •The decision, first reported by Business Daily, follows an assessment by the Kenya Revenue Authority (KRA) that included withholding taxes and Pay As You Earn (PAYE) liabilities.
The tribunal set aside the withholding tax assessments for the years 2017 to 2019 and on deemed interest, based on the lack of evidence presented by M-Kopa regarding the board’s decision-making process. The tribunal found that M-Kopa had not demonstrated that its key operational decisions were made outside Kenya, thus confirming the company’s tax residency within the country.
M-Kopa, which is incorporated in the UK, had defended itself by saying that its board of directors residing in multiple countries, and that the tax jurisdiction does not apply because the company’s place of management is outside Kenya. The fintech also disputed the assessment related to deemed interest on redeemable preference shares, contending that these should not be taxed as they did not qualify as loans under the Income Tax Act.
M-kopa is one of Kenya’s most well-funded fintech companies, having raised over $245 million in equity funding since its inception in 2011. M-Kopa started off retailing solar-powered electrical equipment on a pay-as-you-go arrangement and diversified into health insurance, as well as providing credit for purchases of other items including smart phones and electric motorcycles. It has a customer base of more than 3 million people in Kenya, Nigeria, Uganda and Ghana, and has provided over $1 billion of cumulative credit.
