Sendy, the Kenyan logistics startup that went into administration in 2023, has found itself at the centre of a ruling that could reshape how Kenya’s gig economy is taxed.
In a landmark decision delivered on October 23, the High Court ordered Sendy to pay KES 82.2 million ($635,000) in value-added tax (VAT) to the Kenya Revenue Authority (KRA), ruling that the company wasn’t just a digital intermediary connecting customers to drivers, it was a service provider in its own right.
Justice Helene R. Namisi found that Sendy “exercises a decisive degree of control over the essential elements of the delivery service,” noting that it set terms, authorised deliveries, and received payments in its own name. She stated that, for VAT purposes, it meant Sendy had effectively received the transport service from third-party drivers and supplied it to the end customer.
The decision overturned an earlier ruling by the Tax Appeals Tribunal, which had sided with Sendy’s argument that it was simply a platform provider and should only pay VAT on its commission. The High Court disagreed, saying the tribunal “erred in law” by ignoring the commercial reality of how Sendy operated.
Sendy is still under administration, with the receiver manager yet to complete the process. KRA could consider seizing and auctioning some of its assets that have not been sold to repay creditors. The administrator could not be reached for comment.
Platforms under KRA’s radar
The implications go far beyond Sendy. By treating the company as a principal in its transactions, the court has given the KRA a fresh mandate to pursue other digital platforms that process payments and control key aspects of their ecosystems.
That could include ride-hailing firms such as Uber, Bolt, and Little Cab, as well as food delivery services like Glovo, and online marketplaces like Jumia and Kilimall, all of which have long maintained that they are “technology companies,” not service providers.
Under the ruling, VAT would apply to the entire amount paid by customers through a platform, not just the commission or service fee. That interpretation could increase the costs for platform businesses.
The verdict comes at a time when Kenya’s digital economy is booming. According to the UN Conference on Trade and Development, e-commerce revenues are projected to reach KES 145.8 billion ($900 million) this year, with over 12 million users.
