VAT Liability for Digital Platforms in Kenya: Sendy Case Study

Case Study: Commissioner of Domestic Taxes v Sendy Limited (Income Tax Appeal E137 of 2024) [2025] KEHC 14814 (KLR) (Commercial and Tax) (23 October 2025) (Judgment)

Background Facts

• Sendy is a company operating a digital platform connecting customers who need goods delivered with third-party transporters.
• Following an audit, KRA assessed Sendy for additional VAT. KRA argued that Sendy was providing the transport service itself and should account for VAT on the total fee paid by the customer. Sendy objected, claiming it was only a technology platform earning a commission, and that VAT on the transport service was the responsibility of the individual transporters.
• The Tax Appeals Tribunal agreed with Sendy, finding it was merely a platform provider and not the supplier of transport services. KRA appealed this decision to the High Court.

Key Legal Issue:

Characterization of Supply: Was Sendy, in reality, the principal supplier of the transport service for VAT purposes, or was it merely an intermediary providing a platform service?

The High Court’s Analysis & Decision

Nature of Sendy’s Supply

The Court conducted a detailed analysis, heavily influenced by jurisprudence from the Court of Justice of the European Union (CJEU), which deals with similar VAT laws.

• Principle of Economic Reality: The Court emphasized that the characterization of a transaction for tax must be based on its economic and commercial reality, not just its contractual form (“substance over form”).
• The “Deemed Supplier” Doctrine: The Court applied the logic of the CJEU’s “deemed supplier” or “commissionaire” rule. This rule states that an intermediary who acts in its own name (even on behalf of another) can be deemed to have purchased and then re-supplied the service, making it liable for VAT on the full amount.
• The “Fenix International” (OnlyFans) Test: The Court found the CJEU’s decision in Fenix International highly persuasive. That case established that a platform is presumed to be the principal supplier if it; Authorizes the charge to the customer; Authorizes the delivery of the service; Sets the general terms and conditions

Application to Sendy’s Operations:

The Court found that Sendy exercised a decisive degree of control over the entire transaction, making it the principal supplier:

• Control over Price and Payment: Sendy determined the price, issued the Request for Payment (RFP) in its own name, and received the full payment from the customer into its own bank account. The Court held that the RFP functioned as a tax invoice for the full service.
• Control over Service Delivery: Sendy’s algorithm dispatched the nearest driver; the customer did not choose a specific transporter. This was seen as “authorizing the delivery.”
• Customer Perspective: From the customer’s viewpoint, they were dealing exclusively with Sendy’s brand and application. Sendy was the face of the transaction.
• Distinction from Airbnb: The Court contrasted Sendy’s model with that of Airbnb (which was found to be a mere intermediary). Sendy’s control was likened to Uber’s, where the platform’s control is so integral that it is considered the supplier of the underlying transport service.

Conclusion and Orders

The High Court allowed KRA’s appeal, holding that the Tribunal had erred in law by failing to properly apply the “substance over form” principle and by not recognizing Sendy’s role as the principal supplier due to its control over the transaction.

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