Ride-hailing platform Uber has refuted claims that it plans to leave the Kenyan market. This comes after a day of parliamentary discussions where Uber and Bolt’s representatives expressed concerns about proposed tax changes in the Finance Bill 2024.
A spokesperson who spoke to the Kenyan Wall Street confirmed Uber’s commitment to Kenya and a desire to work with the government on industry-friendly policies.
“Our relationship with various government agencies has been built on mutual respect and a shared vision for a better Kenya,” the Uber Spokesperson said.
Both Uber and Bolt argue the 6% Significant Economic Presence (SEP) Tax on gross turnover for non-resident companies would significantly impact their operations and driver earnings.
They voiced concerns that the SEP tax, coupled with a rise in Digital Service Tax and Corporate Tax Rate, could lead to reduced profitability, a disincentive for foreign investment and increased ride fares for consumers.
Both companies highlighted limitations imposed by the National Transport and Safety Authority (NTSA) capping commission rates at 18%, restricting their ability to absorb additional tax burdens.
How the SEP tax works
The Significant Economic Presence (SEP) Tax targets multinational companies with a substantial economic presence in Kenya, even if they lack a physical presence.
This approach expands Kenya’s tax base to encompass a wider range of digital activities, aligning with international tax practices recommended by the Organization for Economic Co-operation and Development (OECD).
- Who pays: Non-resident companies deriving income from services delivered in Kenya through a digital marketplace.
- Tax rate: 30% of the “deemed taxable profit.”
- Calculating deemed taxable profit: 20% of the company’s gross turnover in Kenya.
This fosters a more level playing field for both local and international companies, promoting a fairer and potentially more competitive business environment.
“Implementing the SEP Tax is inherently complex. Determining what constitutes a “significant economic presence” involves detailed assessments of various digital activities and income streams,” argues Mr John Walubengo, an ICT Lecturer and Consultant.
“This complexity can pose compliance challenges for businesses, especially small and medium-sized enterprises (SMEs) that may lack the resources to navigate the new regulations.”
