E-commerce and e-mobility define the 21st century marketplace, where goods move and services are rendered with minimal physical interaction between supplier and consumer.
At the heart of this seamless exchange stand digital platforms that connect independent providers, be they vendors, riders, or drivers, with end users, typically earning a commission while ensuring all parties are settled.
Yet, as these platforms proliferate, tax authorities are scrutinising the taxable event with renewed vigour: who, precisely, makes the supply, and on what value must Value Added Tax (VAT) be accounted?
The foggy answer to the question as to who should account for VAT has arisen in Kenya. Through a landmark Kenyan High Court decision, Commissioner of Domestic Taxes v Sendy Limited (Income Tax Appeal E137 of 2024), delivered on 23 October 2025 by Justice Helene R. Namisi, the High Court overturned a Tax Appeals Tribunal ruling, holding that a digital logistics platform facilitating deliveries without owning a single vehicle must account for VAT on the full consideration paid by customers, not merely its commission.
This article dissects the importance of efficient tax structuring for business and the impact of this decision on Ugandan digital platforms and what to look forward to in tax reforms affected online businesses and service providers.
THE FACTS
Sendy Limited is a digital logistics platform which connects third party transporters to third party customers requiring transportation / delivery services for third party goods. The Kenya Revenue Authority (KRA) conducted an audit into the affairs of Sendy, and noted variances in Sendy’s turnover compared to its filed returns.
Owing to this variance, KRA indicated that Sendy had underdeclared its sales. This establishment followed a recharacterization of Sendy’s business model.
The model of operation was such that through Sendy’s online platform, drivers and customers requiring delivery services would be connected/matched. Sendy would price the transaction between the two matched independent parties and receive the full payment.
The driver would then be paid by Sendy after [Sendy] deducting its commission fees. According to KRA, Sendy was providing transport services and not merely acting as technology company providing an online platform that connects transporters with customers requiring delivery services.
Analysing the above model, KRA required Sendy to account for VAT on the full customer payments for delivery services rather than just its commission fees. KRA’s position was based on the fact that Sendy controlled the entire value chain of the transactions and that, most importantly, Sendy collects the full consideration for the service directly into its own bank accounts (emphasis ours).
Sendy objected to the assessment and appealed KRA’s objection decision to Kenya’s Tax Appeals Tribunal (the “Tribunal”). The Tribunal Ruling The Tribunal found in favour of Sendy, holding that Sendy “was not a provider of transport services but a platform provider.”
According to the Tribunal, the third-party transporters were the suppliers of transport services and Sendy “the supplier of a platform service to the transporter”.
The Tribunal’s ruling was equally hinged on the finding that Sendy “was an asset¬light company that did not own any of the vehicles used for the deliveries…’’
Accordingly, the Tribunal set aside the objection decision, prompting KRA to appeal to the High Court.
THE HIGH COURT POSITION
At the High Court, KRA maintained that Sendy was the principal supplier of the transport services in question despite the company’s asset-light model, where it connects third-party transporters with clients via an app without owning vehicles.
KRA’s position, as at the Tribunal, was based on the fact that; a. Sendy had commendable degree of control that it exercised over the entire transaction. For example they controlled customer relationships through its digital application, dispatched the nearest driver and determined the price.
Sendy was also charged with issuing a demand for payment (RFP) and most importantly, collects the full consideration for the service directly into its own bank accounts. b. The subsequent payment made to the driver is merely a disbursement or cost of sale, not a remittance of funds belonging to the driver.
For its part, Sendy argued that it was merely a technology intermediary, charging VAT only on commissions remitted after paying drivers.
Accordingly, Sendy posited that the third-party transporters were responsible for accounting for VAT on the transport services drawing on the contractual relationships between the parties.
HIGH COURT DECISION
The High Court applied a “substance over form’ approach, emphasizing the economic reality of transactions.
The Court noted that contractual terms may be redefined where they do not reflect economic reality and have been structured with the sole aim of obtaining a tax advantage.
Drawing on European Union VAT jurisprudence such as the CJEU’s decisions in Fenix International (the OnlyFans case), Uber v Elite Taxi, and Airbnb Ireland, the Court ruled that platforms exercising decisive control become “deemed suppliers.”
In the OnlyFans case it had been argued that the presumption of “deemed supplier” becomes irrebuttable if “…the platform authorises the charge to the customer, or authorises the delivery of the service or sets the general terms and conditions of the supply…”
According to the Court, “…where a platform controls the key aspects of the transaction, it is no longer a mere intermediary but is, for VAT purposes, the supplier.”
In light of the above, the High Court thereby observed that key control factors included; a. Sendy setting prices, b. assigning drivers algorithmically, c. issuing RFPs in its name, and d. collecting full payments directly into its accounts, with driver payouts treated as costs rather than remittances.
The Court likened Sendy to Uber, where integration makes the platform the face of the service from the customer’s perspective, rather than a mere passive role. It noted that “the customer interacts exclusively with the Respondent’s [Sendy] application and brand. The RFP is from the Respondent. From the customer’s perspective, the service is supplied by the Respondent.”
Conclusively, the Court [in Kenya] determined that Sendy “did not merely introduce a customer to a driver. It sets the rules of engagement, controls the allocation of the job, determines the price, and most critically, takes responsibility for the entire billing and payment process. The level of integration and control places the Respondent [Sendy] squarely in a position of principal supplier for VAT purposes.”
Ultimately, the appeal succeeded, upholding KRA’s VAT demand of KSh 82.2 million (approximately Shs 2.36 billion) on full consideration under Section 5 of Kenya’s VAT Act.
ANALYSIS
While this Kenyan precedent is not binding in Uganda, it signals a burgeoning regional tax risk for digital platforms operating in the gig economy, particularly those mirroring Sendy’s model.
We note that several platforms and online marketplaces facilitate e-commerce supplies and deliveries by connecting vendors with third-party riders. Usually, customers place orders via apps, receive invoices covering product value plus delivery fees, and pay the apps / online market directly.
It is rare that the customer pays the service provider. In Uganda, the VAT Act (Sections 4 and 18) imposes tax on taxable supplies by the person making them, with no explicit guidance on platform supplies.
With past experiences, URA could adopt a pro-revenue stance akin to KRA, auditing bank inflows against declared VAT via the EFRIS. If the online market place / platform invoices are deemed tax documents for the full supply, VAT at 18% would apply to entire value and delivery collections, not just the commissions.
However, the above characterisation would be subject to the party’s documentation and transactional and tax structure. While the Courts are moving away from “form” to substance, it does not take away the fact that the form of the transaction remains a defining factor in taxation.
It is accordingly important for taxpayers to conduct health checks as East African tax authorities increasingly harmonize approaches to ensure fair collection amid the platform boom.
Treating this as a potential flashpoint could safeguard against disruptive assessments, preserving operational certainty in a competitive market. The digital economy is changing the way we do business generally and the tax law is following this commerce with an eagle eye.
The authors are tax law experts working with SM & Co. Advocates (formerly Shonubi, Musoke & Co. Advocates)
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