M-KOPA Holding, an asset financing startup, must now pay taxes in Kenya after losing an appeal at a tax tribunal. The startup appealed against a $6.8 million tax demand for 2017 to 2019, arguing that its incorporated in the UK.
M-KOPAs argument, based on the Kenya-United Kingdom Double Taxation Treaty (DTT), was that it is managed and controlled from the UK and therefore exempt from Kenyan taxes. However, the tribunal dismissed this claim.
The tribunal ruled that the startup must pay part of the $6.8 million in back taxes, though it did not determine the exact amount the company owes the Kenya Revenue Authority (KRA).
Despite M-KOPAs claims of having a registered office in the UK and most of its directors residing outside Kenya, the tribunal concluded that the companys tax residency is in Kenya. This means it is subject to Kenyan income and capital gains taxation.
The appellants 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, the tribunal said.
