The Tax Appeals Tribunal has dismissed a suit by media company, MultiChoice Africa Holdings BV, in a dispute with the Kenya Revenue Authority (KRA) over its decision to disallow VAT input claims and demand over KSh 681 million in taxes, penalties, and interest.
The dispute centered on VAT assessments covering the period between January 2021 to June 2023, during which MultiChoice Africa supplied digital entertainment services to consumers in Kenya.Although the company had complied with local VAT registration requirements and filed returns through its Kenyan tax representative, it claimed input tax in its filings but KRA rejected the claims and issued the multi-million-shilling tax bill.MultiChoice argued that it was properly registered under Kenyan VAT laws and entitled to claim input tax incurred in the course of its business.
The firm contended that its compliance with statutory obligations, including the appointment of MultiChoice Kenya as its local tax agent, supported its position. It also sought guidance from KRA on the implementation of the Tax Invoice Management System (TIMS), which it said could not accommodate its foreign-entity PIN.
KRA maintained that the company was engaged in business-to-consumer (B2C) transactions involving digital services delivered via satellite and internet, activities squarely within the scope of taxable digital marketplace supplies under Kenya’s VAT laws. Relying on the 2020 Digital Marketplace Supply Regulations, the authority argued that input tax deductions are not allowed for B2C digital supplies made by non-resident suppliers.
The Tribunal sided with KRA, finding that MultiChoice’s services fell within the categories of electronic and digital content covered under both the VAT Act and the now-revoked 2020 Regulations. It concluded that the regulations clearly prohibited input tax claims on such transactions and KRA was therefore justified in issuing the assessment.
Input tax is the value-added tax (VAT) a business pays on goods or services it buys to run its operations, which it can usually deduct from the VAT it collects on sales.
“In particular, the said regulations provided for the scope of taxable supply through a digital marketplace as being the following: OTT services including streaming television shows, films, music, podcasts and any form of digital content; digital content for listening, viewing or playing on any audio, visual or digital media,” the tribunal ruled.
“Accordingly, the finding by the Tribunal is that the Respondent was justified in issuing an assessment and disallowing the input tax claimed by the Appellant,” it continued.
Multichoice is the parent company of pay-TV services, DSTV and Go-TV. It also owns the popular streaming platform, Showmax.