The news:
- M-KOPA Holdings, a fintech and asset financing company, has been ordered to settle tax obligations in Kenya following a recent tribunal ruling by the Tax Appeals Tribunal.
- The company, which offers pay-as-you-go solar systems, smartphones, and electric bikes across Africa, had appealed against a $6.8 million tax demand covering the years 2017 to 2019.
- The Kenya-headquartered startup had argued that it is incorporated in the United Kingdom and therefore should not be subject to Kenyan taxes under the Kenya-UK Double Taxation Treaty (DTT).
The company contended that it is managed and controlled from the UK, claiming that most of its directors are based outside Kenya.
However, the tribunal dismissed this defence, noting that M-KOPA's key management decisions are made in Kenya, as its Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Commercial Officer (CCO) reside in the East African nation.
This was a significant factor for the court to determine that the fintech startup’s tax residency was in Kenya, making the startup subject to Kenyan income and capital gains taxation.
The tribunal ruled that M-KOPA had failed to provide sufficient evidence that core operational decisions were made outside Kenya, as stipulated by Kenyan tax law.
Consequently, the company is liable for a portion of the $6.8 million tax bill it owes the Kenya Revenue Authority (KRA), although the exact figure is yet to be determined.
“The appellant’s failure to provide evidence to support its argument that the board had actually made core decisions affecting the operation of the company in the meetings held outside Kenya meant that it had failed to discharge the burden of proving that it was not a resident in Kenya as enunciated in Section 30 of the TAT Act,” part of the ruling read.
This ruling is a major victory for the KRA and could set a precedent for other companies claiming foreign tax residency while operating within Kenya. For now, M-KOPA must adhere to the Kenyan tax laws, ensuring fair contribution to the local economy where much of its business is based.
M-KOPA, which operates across several African markets outside of Kenya — its largest market — including Nigeria, Ghana, and South Africa, has seen significant growth in recent years.
In 2023, the African fintech company secured $250 million in funding to fuel its pan-African expansion, following the $75 million it raised the previous year.
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