Kenya’s digital platforms are about to get a lot more expensive to run. A High Court decision just ruled that taxi apps, delivery services, and e-commerce platforms must collect and pay the full 16% VAT on every transaction that goes through their systems – not just on their commission.
This all started with Sendy, the now-defunct logistics startup that connected customers with delivery drivers. The Kenya Revenue Authority came after them for KES 82 million in VAT.
Sendy argued they were just a tech platform, a digital middleman who brought transporters and customers together. They said the actual transport service was provided by independent drivers, so they should only pay VAT on their slice of the fee.
The Tax Appeals Tribunal initially agreed with Sendy, but the High Court was not convinced.
Justice Helene R. Namisi looked at what Sendy actually did: they set the prices, they approved the deliveries, they collected all the money in their own name, and they controlled how the whole thing worked. The court said that when you control that much of a transaction, you’re not just connecting people but providing the service yourself.
For tax purposes, Sendy was receiving the transport service from drivers and then selling it to customers. That means VAT applies to the full amount customers paid, not just Sendy’s cut.
This is going to ripple through Kenya’s entire platform economy. Digital taxi services like Uber, Bolt, and Little Cab have spent years insisting they’re technology companies, not transport companies.
Same story with delivery apps like Glovo and online marketplaces like Jumia and Kilimall. They all say they just connect independent service providers with customers through an app.
However, the court’s logic doesn’t care what you call yourself. If you set the terms, control the pricing, collect the payments, and dictate how things work, you’re in the driver’s seat. And if you’re in the driver’s seat, you’re responsible for the tax on the whole transaction.
Kenya’s e-commerce revenue was expected to hit about KES 146 billion in 2024, with over 12 million users. That’s a lot of transactions that could now be taxed differently.
The 2023 Finance Act already expanded the definition of “digital marketplace” to cover any platform facilitating taxable supplies, and this ruling just gave that law some real bite.
This isn’t a Kenyan problem, though, as UK courts ruled that Uber drivers are workers entitled to minimum wage and benefits, rejecting the company’s claim that it was just a tech intermediary.
Courts globally have been poking holes in the “we’re just an app” defense when platforms clearly control how services are delivered and what customers pay.
For platforms operating in Kenya, this changes everything. They need to register for VAT if they haven’t already. They need to collect tax on the full customer payment. And if authorities decide to also classify them as employers down the line, they could be on the hook for income tax withholding, pension contributions, and health insurance payments.
READ: KRA Targets Global Tech Firms With New Digital Tax Proposal
Some worry this will push traders away from platforms entirely to dodge the 16% tax hit. Others say it’s about time since these companies make money by controlling transactions, so they should bear the tax responsibility that comes with that control.
The practical reality is that platforms that were paying VAT on maybe 10% or 20% of a transaction (their commission) now have to pay it on 100%.
That’s either going to eat into their margins, get passed on to customers through higher prices, or result in lower pay for drivers and delivery workers. Probably some combination of all three.
Kenya’s gig economy was already operating on thin margins. This ruling just made those margins a lot thinner.
