M-KOPA, a UK-based asset financing startup, has been ordered to pay taxes in Kenya after losing an appeal at a Kenyan tax tribunal.
The startup, which appealed against a $6.8 million tax demand from the Kenya Revenue Authority (KRA) for the period between 2017 and 2019, had argued that it was exempt from Kenyan taxes under the Kenya-United Kingdom Double Taxation Treaty (DTT). M-KOPA contended that since it is managed and controlled from the UK, it should not be subject to Kenyan taxation.
However, the tax tribunal dismissed M-KOPA’s argument, ruling that the company’s tax residency is in Kenya, despite being incorporated in the UK. The tribunal emphasized that M-KOPA’s core management decisions are made in Kenya, where key executives including the CEO, CFO, and CCO are residents. As a result, the company is subject to both income and capital gains tax in Kenya.
“The appellant’s failure to provide evidence to support its argument that the board had actually made core decisions affecting the operation of the company in meetings held outside Kenya meant that it had failed to discharge the burden of proving that it was not a resident in Kenya,” the tribunal stated.
Although the tribunal did not determine the exact amount M-KOPA owes, the ruling requires the startup to pay part of the $6.8 million in back taxes. The decision represents a major victory for the KRA and could set a precedent for other startups operating in Kenya but claiming tax residency outside the country.
M-KOPA, known for offering solar power systems, smartphones, and electric bikes through installment payments, has its largest market in Kenya, followed by Nigeria, Ghana, and South Africa. In 2023, the company raised $250 million in debt and equity funding to fuel its pan-African expansion.
