For quite some time the Kenya Revenue Authority (KRA) has been pondering on how to collect Value Added Tax (VAT) from the taxi transport system. Initially KRA had opted to charge VAT to the taxi hailing service providers such as Uber, a US tech giant, and Little Rider, a brainchild of Safaricom Limited and Craft Silicon.
This is a move that was contested by Uber which is the most popular taxi hailing service in Kenya. Uber went outright to declare that it is merely a software company rather than a transport company. To support this argument Uber said that Uber drivers were independent contractors and as such handle their tax matters independently.
After considering their plea, KRA has decided to shift the burden of paying VAT to the car owners. KRA claims that VAT can only be charged by the supplier of taxi services thus transferring the burden of payment of VAT to the owners of the vehicles. This is a major reprieve to taxi hailing services such as Uber, Little Rider, Mondo Ride and Taxify. According to Business Daily the following is the statement from KRA’s commissioner in charge of domestic taxes:
“The companies listed do not actually offer taxi services, but they provide a platform or an app that assists taxi operators in their activities.”
-Benson Korongo, KRA’s commissioner in charge of domestic taxes
According to the same paper, KRA has set a threshold of Ksh.5 million. If the taxi owner grosses the above threshold in a year owing to the taxi business s/he will be liable to pay VAT.