Kenyan payment services provider, Pesapal, has had its appeal thrown out by a Kenyan tribunal. Pesapal's payment service allows users in seven countries to buy airtime, pay bills, and receive payments from customers.
Pesapal had filed an appeal after the Kenya Revenue Authority (KRA) demanded it pay Sh232.2 million ($1.65 million) in tax arrears. The company, in its response, argued that it should not pay VAT on commissions charged when providing services to merchants.
In its response, the KRA argued that the company did not qualify for the tax exemptions, adding that Pesapal had not proven that it was not exclusively a financial service provider or differentiated between the technology and the financial service.
"It should be clear that even if PesaPal was a financial (or payment) service provider, the activity carried on by its business does not fall within the financial services (activity) which are exempted under the First Schedule to the VAT Act, 2013 Part II(1)."
Following the submissions by both parties, the tribunal chaired by Eric Mufula ruled that Pesapal does not qualify for exemption under the VAT Act. "The only way through which the Appellant (Pesapal) could qualify to offer financial service would be if it were to be registered as a financial institution under Section 5 of the Banking Act."