An asset financing startup, M-KOPA Holding, has been ordered to pay taxes in Kenya following an unsuccessful appeal at a tax tribunal. The startup had challenged a $6.8 million tax assessment for the years 2017 to 2019, claiming its incorporation in the UK exempted it from Kenyan taxes.
M-KOPA argued that, under the Kenya-United Kingdom Double Taxation Treaty (DTT), being managed and controlled from the UK made it ineligible for Kenyan taxes. However, the tribunal rejected this argument.
The tribunal ruled that M-KOPA must settle a portion of the $6.8 million in back taxes, without specifying the exact amount owed to the Kenya Revenue Authority (KRA).
Despite M-KOPA’s assertions of having a registered office in the UK and most directors residing outside Kenya, the tribunal determined the company’s tax residency as Kenya. Consequently, it is liable to Kenyan income and capital gains taxes.
The tribunal emphasized, “The appellant’s inability to provide evidence supporting its claim that core decisions affecting the company were made in meetings held outside Kenya led to a failure to prove non-residency in Kenya as required by Section 30 of the TAT Act.”
This ruling marks a significant victory for the KRA and may set a precedent for other Kenyan startups with tax residency registered outside the country.
The tribunal highlighted that key management decisions at the company are made in Kenya, as its CEO, CFO, and CCO are residents of Kenya.
M-KOPA’s primary market is Kenya, followed by Nigeria, Ghana, and South Africa. The startup offers products such as solar power systems, smartphones, and electric bikes, with users paying in small installments. In 2023, M-KOPA secured $250 million in debt and equity funding for its expansion across Africa.