The High Court has stopped the Kenya Revenue Authority from collecting more than Sh100 million worth of taxes from payment service provider Pesapal.
Justice David Majanja suspended the decision from the tax appeals tribunal pending the determination of an appeal filed by Pesapal.
The firm went to court last week after its appeal was dismissed by the tribunal, stating that Pesapal is not a financial service provider that qualifies for an exemption.
“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,” Justice Majanja said in the ruling.
The court further directed the payment service provider to get a bank guarantee for Sh10 million within 21 days from the date of the ruling, failure to which the order will lapse.
“The stay order shall remain in force for one year unless extended by this court,” the judge said and directed the case to be mentioned on July 7 for directions.
The firm had argued it provides a financial service on behalf of its merchants on commissions and should be exempted from VAT. This is after the commissioner of domestic taxes demanded taxes up to Sh233 million.
After objecting to the tax liability, the KRA provided a schedule of taxes due amounting to Sh76.8 million as principal tax and Sh33.9 million in penalties and interest.
The firm appealed to the tribunal on January 6 last year, arguing the commission earned for providing a platform for online payments services was tax-exempt. Pesapal rejected the KRA assessment, arguing it engages with clients and a merchant charged a commission.
