Kenya’s High Court has ruled that digital platforms — including taxi apps, delivery services, and e-commerce marketplaces — must collect and remit the full 16% VAT on every transaction that passes through their systems, not just on their commission.
Why it matters:
The ruling reshapes how Kenya’s platform economy operates. It forces platforms like Uber, Bolt, Glovo, and Jumia to shoulder tax obligations as full service providers, not just intermediaries.
The case that changed everything
It all started with Sendy, the now-defunct logistics startup that connected customers to delivery drivers.
- The Kenya Revenue Authority (KRA) demanded KES 82 million in unpaid VAT.
- Sendy argued it was only a “tech facilitator,” not the service provider, and should be taxed only on its commission.
- The Tax Appeals Tribunal initially sided with Sendy.
- But Justice Helene R. Namisi overturned that, ruling that Sendy effectively provided the transport service itself — setting prices, managing payments, and controlling transactions.
What the court said
“When you control how a service is priced, delivered, and paid for, you’re not just connecting people — you’re providing the service,” Justice Namisi wrote.
That means VAT applies to the full customer payment, not just the platform’s share.
The ripple effect
The decision has massive implications across Kenya’s digital economy:
- Taxi apps like Uber, Bolt, and Little Cab can no longer hide behind the “tech intermediary” label.
- Delivery platforms like Glovo and marketplaces like Jumia may face similar scrutiny.
- E-commerce revenue in Kenya was projected to hit KES 146 billion in 2024, with over 12 million users — a large tax base that could now be tapped more aggressively.
The legal backdrop
The Finance Act 2023 expanded the definition of “digital marketplace” to cover any platform facilitating taxable supplies. This ruling effectively gives that law new teeth.
The global trend
Kenya’s not alone.
- In the UK, courts ruled that Uber drivers are workers, not independent contractors — rejecting the same “just an app” argument.
- Around the world, courts are increasingly holding digital platforms accountable for the real-world services they control.
What’s next for Kenyan platforms:
They now must:
- Register for VAT if not already compliant.
- Collect VAT on the entire customer payment.
- Prepare for possible reclassification as employers, which could mean additional costs like income tax withholding and pension contributions.
The downside
Platforms that once paid VAT on just 10–20% of a transaction (their commission) now face taxes on 100%. That pressure could lead to:
- Higher prices for consumers.
- Lower earnings for drivers and couriers.
- Thinner profit margins for startups already struggling to stay afloat.
The debate
Some critics warn the new tax burden could drive small traders off digital platforms entirely. Others say it’s long overdue accountability for companies profiting from Kenya’s digital economy.
Between the lines
Kenya’s gig economy was already running on tight margins. This ruling just made those margins a lot thinner.
Source: Tech Weez
