[2025] KETAT 226 (KLR)

Multichoice Africa Holdings BV v Commissioner Legal Services and Board Coordination (Tax Appeal E771 of 2024) [2025] KETAT 226 (KLR) (Commercial and Tax) (16 May 2025) (Judgment)

Neutral citation: [2025] KETAT 226 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal E771 of 2024

CA Muga, Chair, EN Njeru, E Ng'ang'a & SS Ololchike, Members

May 16, 2025

Between

Multichoice Africa Holdings BV

Appellant

and

Commissioner Legal Services and Board Coordination

Respondent

Judgment

Bakground 1. The Appellant is a non-resident company incorporated and domiciled in Netherlands whose principal business is provision of electronic audio/video entertainment services via DSTV services transmitted via satellite, Dishless DSTV services (linear pay TV) known as DStv via streaming or DVS and Showmax services transmitted via the internet also referred to as Over the Top (OTT) Services.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent issued the Appellant with a Notice of Assessment dated 11th March 2024 for VAT for the period 1st January 2021 to 30th June 2023 totaling Kshs 681,513,813. 06 inclusive of penalty and interest.

4. The Appellant, dissatisfied with the assessment filed its objection application on 9th April 2024. On 3rd June 2024, the Respondent issued an objection decision fully rejecting the Appellant's objection and confirming VAT principal tax of Kshs 572,712,351. 00.

5. The Appellant being dissatisfied with the objection decision preferred an appeal vide notice of appeal dated 3rd July 2024 and filed on the even date.

The Appeal 6. The Appellant filed its memorandum of appeal dated 15th July 2024 on 16th July 2024 raising the following as its grounds of appeal:a.That the Respondent erred in fact and in law in failing to find that the appellant's television broadcasting services have and continue to be subject to Value Added Tax (VAT) in Kenya pursuant to section 5(1) as read with section 8(2)(c) of the Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”).b.That the Respondent erred in fact and in law in finding that the Appellant's television broadcasting services (DStv Service) are taxable under Section 5(7) of the VAT Act and therefore fall within the scope of the Value Added Tax (Digital Marketplace Supply Regulations) 2020. c.That the Respondent erred in law in seeking to apply the VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023 prior to the date on which they took legal effect.d.That the Respondent erred in fact in failing to take into account the fact that the Appellant has, in accordance with the law, distinguished the VAT treatment of its television broadcasting services from the VAT treatment of it's over the top streaming services.e.That the Respondent erred in fact and in law in failing to find that Regulation 11 of the VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023 and Regulation 10 of the VAT Digital Marketplace Supply Regulations 2020 contradict Section 17 of the VAT Act and that the resultant ambiguity in the law should be determined in favour of the Appellant.

Appellant’s Case 7. The Appellant supported its case with a Statement of facts dated and file don 15th July 2024. The Appellant’s written submissions dated and filed on 9th April 2025 were adopted by the Tribunal during the hearing on 24th April, 2025.

8. The Appellant posited that it does not have any operations, assets or employees in Kenya. Its television broadcasting services (DStv services) are supplied from outside Kenya and received by customers in Kenya through broadcasting satellite located outside Kenya while its Showmax services are provided via online streaming. Broadcast technology enables the Appellant to offer services to its Kenyan subscribers without creating a Permanent Establishment in the country.

9. The Appellant stated that having no physical presence or place of business or employees in Kenya, the Appellant appointed MultiChoice Kenya Limited (MCK) to act as the agent for collection of VAT from the Appellant's customers.

10. The Appellant stated that MCK also provides Subscriber Management Services to the Appellant's customers in Kenya.

11. The Appellant stated that upon the enactment of the VAT Act, its television broadcasting services continued to be subject to VAT in Kenya pursuant to the charging section, that is, section 5(1) of the VAT Act as read together with the place of supply rules provided for under Section 8 of the VAT Act. The Appellant stated that more specifically, section 8(2)(c) of the VAT Act provides as follows:“8(2) If the place of supply of business of the supplier is not in Kenya, the supply of services shall be deemed to be made in Kenya if the recipient of the supply is not a registered person and –(c)the services are radio or television broadcasting services received at an address in Kenya.”

12. The Appellant stated that it has and continues to charge VAT on its supplies deemed to be made in Kenya in accordance with these provisions. The Appellant also stated that the Appellant, being a non-resident person, appointed MCK to act as its tax representative in Kenya for purposes of complying with its VAT obligations pursuant to the now repealed section 9 of the VAT Act as read with Section 15A of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) and that this appointment did not alter the nature and characterization of the Appellant's supplies.

13. The Appellant stated that through its tax representative MCK, wrote to the respondent on 28th August 2023 clarifying its position that it’s the DSTV service have always been vatable pursuant to Section 5 (1) of VAT Act and 8(2)(c) of the VAT Act even prior to the introduction of Section 5(7) then covering supplies made through a digital marketplace.

14. That Appellant stated that the Respondent issued a subsequent return review finding dated 21st February 2024 disallowing input tax claimed by the appellant amounting to Kshs. 681,513,813. 06 for the period January 2022 to June 2023 and advising the Appellant that they are not entitled to claim input VAT.

15. The Appellant stated that through a letter dated 29th February 2024, it wrote to the Respondent distinguishing between the different services offered by the Appellant (television broadcasting services in the form of 'DStv and over the-top streaming services in the form of 'Showmax') and setting out the provisions under which each of the supplies were chargeable to tax.

16. The Appellant averred that the Respondent went ahead and issued a notice of assessment dated 11th March 2024 against it totalling to Kshs. 681,513,813. 06 comprised of disallowed input tax claimed by the Appellant from February 2022 to June 2023 amounting to Kshs. 572,712,351. 33, penalty amounting to Kshs. 28,635,617. 57 and interest of Kshs. 80,165,844. 16. The Appellant lodged a notice of objection through its letter dated 9th April 2024.

17. The Appellant asserted that it is and has always been subject to VAT in Kenya pursuant to section 5(1) as read with section 8(2)(c) of the VAT Act. The Appellant maintained that Section 5(1) of the VAT Act has to be read together with Section 8 of the VAT Act which provides for the place of supply.

18. The Appellant noted that the DStv services supplied by it are linear pay television broadcasting services that are received by customers in Kenya. These are taxable supplies. Pursuant to section 5(1) as read with Section 8(2)(c) of the VAT Act, these services are deemed supplied in Kenya and therefore the Appellant, though non-resident, is obliged to register, charge and account for VAT thereon.

19. The Appellant stated that it was on the basis of the foregoing that it made its input VAT claims pursuant to section 17 of the VAT Act which unequivocally permits any registered person (resident or non-resident) who incurs input VAT on a taxable supply to claim the input VAT where the said input VAT has been incurred for the purposes of making taxable supplies.

20. The Appellant stated that these provisions remain in effect and continue to have the full force of law and that the Appellant continues to comply with them. The changes introduced by the Finance Act, 2019 which introduced section 5(7) of the VAT Act did not amend or in any way affect the provisions of section 8 of the VAT Act.

21. The Appellant averred that Section 8(2)(c) of the VAT Act is still in force and has not been repealed or amended and no inference can be made with respect to that provision by implication. That any amendments to other provisions of the VAT Act including section 5 thereof did not and cannot take away the legal force of section 8(2)(c) of the VAT Act and neither can such amendments be imputed on it.

22. The Appellant argued that the Respondent acquiesced in receiving the Appellant's VAT payments from September 2013 on the basis that this was chargeable pursuant to section 5(1) and 8(2)(c) of the VAT Act but now contended that the Appellant's supplies are chargeable to VAT pursuant to section 5(7) of the VAT Act with the sole intention of denying it its right to claim input VAT which is contrary to the law, contrived and inequitable.

23. The Appellant argued that if the Tribunal upholds the Respondent's position, it will in effect render all the VAT paid by the Appellant to have been paid in error which is would run contrary to the presumption against absurd outcomes.

24. The Appellant stated that electronic services as provided for under Section 8(2)(d) are defined under Section 8(3) of the VAT Act to include political, cultural, artistic, sporting. scientific and other broadcasts and events including broadcast television when delivered on or through a telecommunications network. That there appears to be no distinction between the radio or television broadcasting services referred to under the provisions of Section 8 (2)(c) of the VAT Act and other broadcasts and events including broadcast television set out under Section 8(3) of the VAT Act.

25. The Appellant stated that whilst it would appear that its television broadcast supplies fall within two provisions that determine the place of supply, that is, Sections 8(2)c) and 8(2)(d) as read with Section 8(3) of the VAT Act this is not the case. Section 8(2) of the VAT Act makes use of the disjunctive 'or between subsections, meaning that the Appellant's supplies falling within one subsection precludes them from falling into any other.

26. The Appellant maintained that Section 8(2)(c) of the VAT Act is still in effect and capable of being interpreted and applied. That the amendments and the enactment of the Regulations did not alter the validity of Section 8(2)(c) of the VAT Act, which continue to apply to the Appellant's business.

27. The Appellant asserted that DStv satellite television broadcasting services do not fall within the ambit of Section 5(7) of the VAT Act and have always been characterized under Section 8(2)(c) of the VAT Act.

28. The Appellant avowed that the scope of section 5(7) of the VAT Act was limited to supplies made through a digital marketplace as defined in section 5(9) of the VAT Act. That a digital marketplace was then clearly defined as a 'platform that enables direct interaction between buyers and sellers of goods and services through electronic means’.

29. The Appellant argued that for it to fall within the ambit of this provision, it would have to make supplies through a platform on which buyers and sellers directly interact and transact in goods and services between themselves. That the Appellant does not do this it simply provides linear pay television broadcasting services to its customers without making use of any use of a digital marketplace as defined.

30. According to the Appellant, it is clear from the wording of Section 5(7) of the VAT Act that this introduced provision was aimed at merely supplementing the existing charging provisions under Section 5(1) of the VAT Act and does not create a new layer of tax or new administrative measures for taxpayers who already fell within the ambit of section 5(1) of the VAT Act, who were duly registered under section 34 of the VAT Act and who were already subjecting their supplies to VAT in Kenya.

31. The Appellant argued that the Respondent ought not to have applied the 2023 Regulations before they took legal effect. According to the Appellant, Section 67(2) of the VAT Act, under which the 2023 Regulations were created, requires that before any regulations made under the VAT Act take effect, they ought to have been tabled before 67(2) of the VAT Act. The Appellant argued that there is no legal basis for the Respondent to apply the 2023 regulations prior to this date.

32. The Appellant argued that even if the 2023 Regulations were to apply to the Appellant’s DStv services, which is not the case, the Respondent lacks the legal basis to apply these before they came into effect. The Appellant averred that if the Respondent's position were to be upheld, any assessment can only be made from the date on which the 2023 Regulations took effect, that is; after 5th July 2023. That the assessment period was in respect to February 2022 to June 2023, which was prior to this date and on this basis alone the assessment would be set aside. That this again was without prejudice to the Appellant’s position that the 2020 and 2023 Regulations do not apply to its DStv satellite broadcast television services.

33. The Appellant stated that it has distinguished the input VAT treatment of its DStv satellite television broadcasting services and its over the top streaming services. It asserted that its supplies include the following:a.Television broadcasting services (DStv services).b.Other streaming services supplied via the internet otherwise referred to as Over the Top (OTT) services.

34. The Appellant stated that it segregated the income earned from OTT streaming services from linear pay television broadcasting services and segregated the input VAT relating to each of the two revenue streams and did not claim ay input VAT connected to the supply of the streaming services. The Appellant also stated that it underwent a verification exercise with the Respondent wherein it demonstrated the specifics of the segregation of income from the two revenue streams. That a follow up letter dated 4th April 2024 was sent to the Respondent with further certifications.

35. The Appellant submitted that Regulation 11 of the VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023 and Regulation 10 of the Digital Marketplace Supply Regulations 2020 contradict Section 17 of the VAT Act and as a result, the law should be interpreted and applied contrafiscum.

36. The Appellant relied on the following case laws to support its case: Kenya Revenue Authority v Export Trading Company Limited 2022/ KESC 31 (KLR)

Tan Cheng Bock v Attorney-General (2017)S GCAS0

Commissioner for the Implementation of the Constitution v Parliament of Kenya & 5 others [2013/ eKLR,

W..E.C lines Kenya Limited v Commissioner of Domestic Taxes TAT Appeal No.137 of 2018

Daniel Shunari Njiroine v Naliaka Maroro [2014] eKLR

Samuel Kamau Macharia & Another v Kenya Commercial Bank Ltd & 2 Others, [20121 eKLR

PVH Kenya Limited Commissioner of Legal Services & Board Coordination (Appeal712 of 2021) [20231 KETAT 310 (KLR) where

Kenya Revenue Authority y Man Diesel& Turbo Se, Kenya /2021/ €KLR

Mount Kenya Bottlers and 3 others v The Kenya Revenue Authority and 3others (Civil Appeal No. 164 of 2013

37. Based on the foregoing, the Appellant sought the following reliefs from the Tribunal:a.That the Appeal be allowed;b.That the Respondent's objection decision dated 3rd June 2024 be set aside; andc.That the costs of this Appeal be awarded to the Appellant.

Respondent’s Case 38. The Respondent statement of facts dated and filed 15th August 2024 were deemed by the Tribunal’s Ruling on 28th February, 2025 to be have been properly on record. The Respondent in complying with the Tribunal’s directions on 24th April 2025 filed its written submissions dated 28th April 2025 on 29th April 2025.

39. In response to ground (a) of the Appeal, whereas the Appellant argued that its services continue to be and should be subjected to VAT pursuant to Section 5(1) as read together with Section 8(2)(c) of the VAT Act, the Respondent averred that the Appellant's position is erroneous.

40. The Respondent maintained that Section 5(1) (c) of the VAT Act is the charging Section for a supply of imported taxable services.

41. The Respondent admitted that it was true that the Appellant's DSTV Services are imported services however, it asserted that the said section must be read together with other sections of the Act to determine with specificity the nature of the imported services supplied by the Appellant to its customers in Kenya.

42. The Respondent stated that prior to the amendments by the Finance Act 2019 and Finance Act 2021 to Section 5 i.e. the charging section to the VAT Act, the Appellant was relying on Section 5(1) of the VAT Act and the place of supply rules under the provisions of Section 8 of the VAT Act to subject its DSTV Services to VAT as television broadcasting services. However, the nature of these DSTV Services, i.e. the fact that they are broadcasting services that are digital in nature and provided over a digital marketplace, or over the internet, or electronically did not start with the amendments by the Finance Act 2019. That the nature of the said services remained the same, and were specifically recognized by the Act through the amendment introduced by the Finance Act 2019.

43. According to the Respondent, in view of the fact that the charging Section 5 under Sub-Sections 7 at 9 is now specifically recognizing the services provided through a digital market place, the internet or electronically, to which the Appellant's DSTV Services belong, then the charging section to DSTV services is Section 5(1) as read together with Section 5(7) and (9) of the VAT Act.

44. The Respondent stated that the place of supply of services rules under Section 8(2) of the VAT Act provides for the place of supply in relation to supplies made to non-registered persons.

45. It added that prior to establishing the place of supply, recourse must be made to the charging section first. That in this instance, effective 1st November 2019, DSTV services were imported services, that were supplied through a digital market place as provided for under Section 5(1) and Section 5(7) - (9) of the VAT Act. That upon establishing that, one can then determine the place of supply for such rules, but at the end of the day, the recourse must be made to the charging section which is Section 5 of the VAT Act first.

46. The Respondent stated that while it is notable that DSTV Services are television broadcasting services, they are digital television broadcasting services. That this distinction is very key in the sense that any service that is digital in nature and/or provided through a digital marketplace, internet or electronically is now specifically provided for under the provisions of Section 5(7) -(9) of the VAT Act.

47. The Respondent stated that Kenya migrated from analogue to digital television broadcasting services more than a decade ago and the law in issue was amended to reflect and specifically provide for digital services including digital television broadcasting services.

48. The Respondent stated that upon enactment of the amendments under the Finance Act 2019 onwards, the charging section DSTV services is therefore covered under Section 5(1), 5(7) -(9) of the VAT Act, and the place of supply rules under Section 8 must be read in reference to the charging section. The Respondent therefore stated that upon the enactment of the Finance Act 2019 amendments to Section 5 of the VAT Act, the Appellant and all taxpayers were obligated to subject DSTV services in line with and in compliance with the amendments

49. That it was therefore erroneous for the Appellant to suggest that DSTV Services should be subjected to VAT pursuant to Section 5(1) and Section 8 of the VATA.

50. That notably, the laws on taxation of the digital economy including Section 5(7)-(9) of the VAT Act herein are recent legislations enacted upon recognition of the need to specifically provide for goods and services offered in the digital economy and as such, such laws take precedence over previously existing general provisions.

51. The Respondent asserted that it was erroneous for the Appellant to suggest that the amendments introduced by the Finance Act 2019 and Finance Act 2021 on Section 5 of the VAT Act are otiose. The Respondent argued that the place of supply rules are different from the charging section which is the starting point in determining the VAT treatment of any vatable supply.

52. The Respondent argued that it is also not true that Section 8(2)(d) of the VAT Act could not be effected prior to the amendments. That in view of the express definition under Section 8(3), the Appellant's interpretation of Section 8(3), and the interplay between the charging section and the place of supply rules under the VAT Act is unfortunately erroneous.

53. In response to ground (b) of the appeal that the Appellant's digital satellite television broadcasting services do not fall within the ambit of Section 5(7) to 5(9) of the VAT Act, and that has always been characterized under Section 8(2)(c) of the VAT Act, the Respondent replied in stating that DSTV Services were specifically provided for under Section 5(7) to 5(9) of the VAT Act. The Respondent further reiterated that Section 8(2) of the VAT Act provides for place of supply rules and that the Appellant's services are Imported services that are digital in nature, provided over a digital market place, the internet or electronically.

54. According to the Respondent, Section 8(2)(c) of the VAT Act is a catch all provision for place of supply of rules for imported radio and television broadcasting services, while the charging section for digital television broadcasting services effective 1st November 2019 is now specifically provided for under Section 5(7) to 5(9) of the VAT Act. The Respondent argued that before establishing the place of supply, one must make reference to the proper charging section.

55. The Respondent further stated that in providing DSTV services to its customers, there is interaction on between the Appellant and the user of the service through the DSTV Technology. The Respondent noted that the Appellant admitted that indeed DSTV Services can be streamed, and the writing adduced herein show that there is indeed a technology platform for the said DSTV Services.

56. According to the Respondent, it was therefore erroneous for the Appellant to state that there is no platform/technology that enables the Appellant to sell the DSTV channels to users in Kenya, or a platform that enables the user in Kenya to offer to buy and for the Appellant to provide the said DSTV Services.

57. In response to paragraph 40 of the Appellant's statement of facts, the Respondent stated that laws are made to keep up with the evolution of society. In this instance, while the digital economy has been in existence and continues to evolve for more than two decades now, it is imperative for the government and globally that Kenya reconsiders her laws to ensure that firstly, they are up to date with the society evolution, and for taxation, the sale of goods and services; and secondly, where transactions are yet to be recognized, to recognize such transactions and bring them to tax.

58. In response to ground (c) of the appeal that the Respondent ought not apply the 2023 Regulations before they took legal effect, the Respondent noted that the period in issue in the assessment amount of Kshs 681, 513,813. 06 was from February 2022 to June 2023. The Respondent noted that during this period, the 2020 regulations were partly in effect, until repealed by the 2023 regulations, when the 2023 regulations took effect.

59. For the period prior to the enactment of the 2023 regulations, the 2020 regulations were in place to apply together with Sections 5(7) to 5(9) of the VAT Act on the Appellant's digital satellite television services. The Respondent argued that it did not apply the 2023 regulations prior to their enactment.

60. In response to ground (d) of the appeal that the Appellant has distinguished the input VAT treatment of its DSTV Satellite television broadcasting services and over the top streaming services, the Respondent stated that the DSTV services provided by the Appellant are digital and electronic in nature due to the fact that there is interaction between the Appellant and the user through the Appellant's technology.

61. The Respondent maintained that the Appellant's services are electronic services offered either on a digital marketplace, over the internet or electronically. For DSTV services that are streamed over the internet as admitted by the Appellant in its correspondence, they would still fall under the definition of supply made through a digital marketplace.

62. Consequently, the Respondent asserted that the treatment of DSTV satellite television services and over the top services under the VAT Act is both under Sections 5(7) to 5(9) of the VAT Act. Consequently, the Respondent asserted that Appellant cannot claim input VAT on the supply of any of the said services.

63. In response to ground (e) of the Appeal, Regulation, 11 of the VAT (Electronic, Internet and Digital Marketplace Supply) Regulations 2023 and Regulation 10 of the Digital Marketplace Supply Regulations 2020 contract Section 17 of the VAT Act and as result, the law should be Interpreted and applied contrafiscum, the Respondent argued that contrary to the Appellant's averments, the 2020 and 2023 Regulations do not contradict Section 17 of the VAT Act, but instead, are to be interpreted in harmony with each other.

64. The Respondent also noted that claiming of input VAT under the provisions of Section 17 is subject to the provisions of the rest of the Act and the Regulations. It added that the 2020 and 2023 Regulations subject to the dispute herein were enacted pursuant to the provisions of Section 5(8) of the VAT Act.

65. The Respondent also argued that in this instance, Section 5(8) has empowered the Cabinet Secretary to enact regulations to operationalize Section 5(7) of the VAT Act, which regulations prohibit claiming of Input Vat for supplies made under the provisions of Section 5(7) of the VAT Act.

66. The Respondent averred that Regulation of 11 of the VAT (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023 provides that a deduction of input tax by a supplier shall not be allowed for transactions relating to an electronic, internet or digital marketplace supply.

67. The Respondent submitted that the Appeal was not merited on the basis that the services offered by the Appellant and subject to the dispute herein are DStv services transmitted via satellite; Dishless DStv services via streaming also known as DStv via Streaming (DVS); and over the top streaming services (showmax services). It submitted that these services fell within the meaning of provisions of Sections 5(7) to 5(9) of the VAT Act which provides for services provided through a “digital marketplace.” It also submitted that section 8(2)(c) of the VAT Act provides for radio or television broadcasting services received at an address in Kenya which covers the Appellant’s services.

68. Further, the Respondent submitted that the Appellant supplied imported services within the meaning of Section 5(1) of the VAT Act and that those supplies were not exempt from taxation. However, the Respondent submitted that input tax was not claimable.

69. Pursuant to regulation 10 of the Value Added Tax (Digital Marketplace Supply) Regulations, 2020 which provides as follows:“Deduction of input tax shall not be allowed under the simplified VAT registration framework.”

70. Consequently, the Respondent maintained that the assessments and denial of input VAT was well within the law.

Respondent’s Prayers 71. The Respondent prayed that the Tribunal would:i.Uphold the its objection decision dated 3rd June 2024 as proper and in conformity with the provisions of the Law; andii.That this Appeal be dismissed with costs to the Respondent

Issues for Determination 72. Having carefully evaluated parties’ pleadings, documents and written submissions the Tribunal identified the following single issue for determination:Whether the Respondent was justified in disallowing the input tax claimed by the Appellant.

Analysis and Findings 73. The Tribunal having determined the issues falling for its determination proceeds to analyse the same as hereunder:Whether the Respondent was justified in disallowing the input tax claimed by the Appellant.

74. The Tribunal having reviewed the parties’ pleadings notes that it is not in contention that the Appellant is a non-resident company, domiciled in the Netherlands and providing services to customers located in Kenya during the period under review (2020-2023) and is duly registered for VAT pursuant to the provisions of Section 34 of the VAT Act. In compliance with Section 15A of the TPA, the Appellant appointed Multichoice Kenya Limited (MCK) as its tax representative. MCK has since been filing VAT and making payments on behalf of the Appellant. The Tribunal notes that Appellant is in the business of providing entertainment services via DSTV services transmitted via satellite.

75. The genesis of the present dispute is a letter dated 30th November 2022 wherein Appellant's tax representative wrote to the Respondent seeking guidance on the implementation and operationalization of the Tax invoice Management System (TIMS) upon realizing that the system does not accommodate transactions by non-resident registered persons due to the special characters exhibited by its PIN.

76. The Tribunal notes that in response, through a letter dated 6th July 2023, the Respondent informed the Appellant that the nature of the Appellant’s supplies were chargeable to tax pursuant to the provisions of Section 5(7) of the VAT Act and that the Appellant was prohibited from claiming input VAT under Regulation 11 of the VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023 (2023 Regulations).The Appellant averred that the Respondent subsequently carried out a review of the Appellant's returns and communicated its findings to the Appellant through a letter dated 21st August 2023 it sought disallow input tax claimed by the Appellant.

77. The Tribunal further notes the Appellant’s averment that the Respondent issued the Appellant with VAT assessment vide notice of assessment dated 11th March 2024 for the period between February, 2022 to June 2023 totalling to Kshs 681,513,813. 06 inclusive of penalty and interest upon finding that the Appellant was claiming input tax even though it is engaged in supply of digital services in Kenya.

78. Section 5(1)(c) of VAT Act provides for charging VAT on a supply of imported taxable services. It provides as follows:‘‘(1) A tax, to be known as value added tax, shall be charged in accordance with the provisions of this Act on—(a)...........;(b)...........(c)a supply of imported taxable services.’’

79. Section 5((7) of VAT Act provides as follows:“The provisions of subsection (1) shall be applicable to supplies made over the internet or an electronic network or through a digital marketplace.’’

80. The Tribunal notes that the provisions of Section 5(7) of the VAT Act were introduced by Section 18 of the Finance Act, No. 23 of 2019. The following provisions of Section 5(9) VAT Act define the term ‘digital marketplace’ as follows:‘‘For the purposes of this section, "digital marketplace" means an online platform which enables users to sell goods or provide services to other users.’’

81. Further, the Tribunal notes that Section 8 of VAT Act defines place and time of supply. Since the assessment covered the period February 2022 to June 2023, the Tribunal relied on the provisions of Section 8 before amendment by the Finance Act 2023. Section 8 of the VAT Act provided as follows:‘‘8. Place of supply of services(1)A supply of services is made in Kenya if the place of business of the supplier from which the services are supplied is in Kenya.(2)If the place of business of the supplier is not in Kenya, the supply of services shall be deemed to be made in Kenya if the recipient of the supply is not a registered person and—(a)the services are physically performed in Kenya by a person who is in Kenya at the time of supply;(b)..;(c)the services are radio or television broadcasting services received at an address in Kenya [emphasis ours];(d)the services are electronic services delivered to a person in Kenya at the time of supply; or…{emphasis ours}(e)...’’

82. Section 8(3) of the VAT Act defined ‘electronic services’ as follows:(3)In this section—“electronic services”[emphasis ours] means any of the following services, when provided or delivered on or through a telecommunications network—(a)websites, web-hosting, or remote maintenance of programs and equipment;(b)software and the updating of software;(c)images, text, and information;(d)access to databases;(e)self-education packages;(f)music, films, and games, including games of chance; or [emphasis ours](g)political, cultural, artistic, sporting, scientific and other broadcasts and events including broadcast television. [emphasis ours]”

83. The Tribunal notes that the services that the Appellant offered were outlined pursuant to the provisions of Section 8 of VAT Act and were therefore subject to VAT. The Tribunal also notes that the Respondent disallowed input VAT claimed by the Appellant pursuant to the Value Added Tax (Digital Marketplace Supply) Regulations, 2020 which have since been replaced by Value Added Tax (Digital Marketplace Supply) Regulations, 2023. In view of the fact that the assessment covered the period between February, 2022 and June, 2023 the applicable Regulations are those of 2020.

84. The Value Added Tax (Digital Marketplace Supply) Regulations, 2020(now revoked) provided for its scope. In particular, Regulation 3(c), (j) and (l) of the said regulations provided for the scope of taxable supply through a digital marketplace as being the following:i.OTT services including streaming television shows, films, music, podcasts and any form of digital content;ii.digital content for listening, viewing or playing on any audio, visual or digital media;iii.electronic services specified under Section 8(3) of the VAT Act.

85. Having found that the activities of the Appellant were included in Regulation 3 (c), (j) and (l) the Respondent declined to allow input tax on the basis of the provisions of Regulation 11 of the said regulations which provided as follows:‘‘11. Claim for input taxA deduction of input tax by a supplier shall not be allowed for business-to-consumer transactions for a supply on a digital marketplace.’’

86. 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.

Final Decision 87. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal lacks merit and proceeds to make the following Orders:a.The Appeal be and is hereby dismissed.b.The objection decision dated 3rd June 2024 be and is hereby upheld.c.Each party to bear its own cost.

88. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 16TH DAY OF MAY 2025. CHRISTINE A. MUGA - CHAIRPERSONELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER