M-KOPA Holdings has been ordered to pay $6.8 million (Ksh 885 million) in taxes to the Kenyan government following a ruling by the Tax Appeals Tribunal.
The tribunal found that the company, despite being registered in the UK, could not prove that its management and operations were controlled from the United Kingdom, as required under the Kenya-United Kingdom Double Taxation Treaty (DTT).
The Kenya Revenue Authority (KRA) had previously assessed M-KOPA’s tax obligations, including withholding tax and Pay As You Earn (PAYE), from 2017 to 2019, amounting to $6.8 million (Ksh 585 million).
M-KOPA contested this, arguing that since it was incorporated in the UK and claimed to be managed from there, it was not liable to pay taxes in Kenya. However, the tribunal dismissed this assertion, pointing out that the company had failed to provide sufficient evidence to back its claims.
Central to the tribunal’s decision was the determination that M-KOPA’s key business operations and management decisions were largely made within Kenya.
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Despite the company maintaining a registered office in the UK and having most of its directors living outside of Kenya, the tribunal found that the chief executive officer (CEO), chief financial officer (CFO), and chief commercial officer (CCO) were all based in Kenya.
The tribunal concluded that this established Kenya as the company’s tax residency, making it liable for income and capital gains tax under Kenyan law.
This ruling could set a guide for other firms in Kenya with similar tax residency arrangements. M-KOPA, which operates in several African markets, including Kenya, Nigeria, Ghana, and South Africa, offers a range of products, such as solar power systems, smartphones, and electric bikes.
These are provided through a pay-as-you-go model, where customers make small, incremental payments.
In 2023, the fintech company secured $250 million in debt and equity funding to support its expansion across Africa. However, with this recent tax ruling, M-KOPA may face further investigations over its tax compliance in other jurisdictions where it operates.
