The Kenya Revenue Authority (KRA) has shifted the burden of paying value added tax for e-taxi hailing to car owners, handing Uber — the US tech giant — a major reprieve.
The taxman made its position known in response to reports that it was targeting e-taxi operators such as Uber and Safaricom-backed Little Ride for consumption tax by ensuring their cab prices are VAT-inclusive.
The KRA now reckons that firms such as Uber, Little Ride, Mondo Ride, and Taxify are IT firms that only provide a software to power the taxi industry.
“The companies listed do not actually offer taxi services, but they provide a platform or an app that assists taxi operators in their activities,” said Benson Korongo, KRA’s commissioner in charge of domestic taxes.
Mr Korongo told the Business Daily that VAT for taxis is charged on “the supplier of such services”, effectively transferring the tax liability to owners of vehicles signed up with taxi hailing apps.
The threshold for beginning to pay VAT is if a vehicle owner carrying out taxi business grosses a turnover of Sh5 million in a year, the tax agency said.
“Where there is failure to comply then such cases are detected through the audit and compliance monitoring programmes,” Mr Korongo. The KRA’s 360-degree about-turn on taxing taxi apps has split major players in Kenya’s cab market, some of whom have been paying VAT.
The position is seen as controversial because it leaves taxi companies such as Pewin and Kenatco in the net while letting go of bigger players in the market such as Uber.
Uber – the biggest player in Kenya’s taxi market with more than 1,000 drivers and about 10,000 journeys a day – is seen as the biggest winner given the tech giant had passed the trouble of paying VAT to its registered drivers.
“Uber driver-partners are not employees, but independent operators who are responsible for their own tax affairs,” a spokesperson at the firm told the Business Daily last week.
The American ride-hailing app announced in May that its Kenyan operations had logged more than a million journeys — totalling eight million kilometres — since launching in Nairobi in January 2015. It expanded to Mombasa in March this year and later to Thika in June.
Little Ride reacted to the taxman’s new position by saying it was mulling stopping payment of VAT.
“We are also in discussion with KRA on provision of information. If we get a green light from them, we would stop the same,” said Kamal Budhabhatti, chief executive at Craft Silicon, the firm which developed the app.
Little Ride presently records about 3,500 journeys daily from its pool of 1,600 active drivers, and is ranked the second biggest e-haling app in Kenya. It launched in Nairobi in July and expanded to Mombasa early this month.
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Credit: Business Daily
