Pesapal Gets High Court Reprieve From KRA

Pesapal seeking VAT tax exemption moves to court

Pesapal was able to secure a temporary injunction following an appeal at the high court. The injunction halts Kenya Revenue Authority (KRA) efforts to have the company pay more than Ksh 100 million.

The injunction is valid until the appeal is determined.

“The stay of execution and or collection of taxes based on the judgment of the Tribunal is granted pending hearing and determination of the appeal on the terms hereunder,” ordered Justice David Mayanja said in his ruling.

Furthermore, the high court directed Pesapal to get to get a bank guarantee for Sh10 million within 21 days from the date of the ruling. In the event the payment provider fails to do so, the court order will lapse.

As of now, the order shall stay in force for a period of one year. Additionally, the court will offer directions on the order on 7th of July.

Pesapal Had Lost Tribunal Appeal

Pesapal had lost a Ksh 233 million fight with KRA. The company  which offers online payment services that integrate with various banks, mobile e-money transfer platforms argued that it should be exempt from value-added tax (VAT). The firm claims it offers its services on a commission basis.

For this reason, the firm had appealed to a KRA tribunal to have its services VAT exempt.

Nonetheless, a tribunal chaired by Eric Wafula ruled that Pesapal does not qualify as a financial service provider under the VAT Act. Hence, the tribunal found the company unqualified for the exemption.

In its findings, the tribunal stated that Pesapal would need to be registered as a financial institution under the Banking Act to offer financial services.

In conclusion, the tribunal found that Pesapal services do not amount to a financial service. However, the tribunal stated the firm only facilitates payment processes on behalf of other parties. In brief, they stated the company is an IT system that facilitates financial services.

Following the decision by the tribunal, Pesapal sought redress at the high court last week.

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