M-KOPA Ordered to Pay Kenyan Taxes After Losing $6.8M Appeal Despite UK Incorporation
M-KOPA must now pay taxes in Kenya after losing a $6.8 million tax dispute. The company, which argued for UK tax residency, was ruled by a tax tribunal to be subject to Kenyan taxes due to key management decisions being made in Kenya.
M-KOPA Holding, an asset financing startup, is now required to pay taxes in Kenya after losing an appeal at a tax tribunal. The startup had contested a $6.8 million tax demand for the years 2017 to 2019, arguing that it was incorporated in the UK and thus exempt under the Kenya-United Kingdom Double Taxation Treaty (DTT). M-KOPA claimed that it was managed and controlled from the UK.
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However, the tribunal rejected this argument, ruling that M-KOPA must pay a portion of the $6.8 million in back taxes, although the exact amount owed to the Kenya Revenue Authority (KRA) was not specified. The tribunal determined that M-KOPA’s tax residency is in Kenya due to the company's failure to provide sufficient evidence that core management decisions were made outside the country. Despite its UK registration and directors residing abroad, the tribunal noted that key figures like the CEO, CFO, and CCO are Kenyan residents, further solidifying the company's tax obligations in Kenya.
This decision marks a significant win for the KRA and could impact other startups in Kenya that have tax residency outside the country. Kenya remains M-KOPA’s largest market, followed by Nigeria, Ghana, and South Africa. The company, which offers products like solar power systems, smartphones, and electric bikes through small installment payments, secured $250 million in debt and equity funding in 2023 to fuel its pan-African expansion.
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