Drivers hit as taxi-hailing firm Bolt transfers VAT obligation to them
Bolt says its drivers will now foot a 16 percent Value Added Tax (VAT) on digital supplies.
Drivers signed up by the ride-hailing firm Bolt will now foot a 16 percent Value Added Tax (VAT) on digital supplies after the Estonian mobility firm stopped shouldering the payments—a shift that is likely to trigger a feud between the parties.
Bolt said that it has absorbed the VAT obligation over the past 15 months on behalf of the drivers since the ratification of the digital marketplace (Electronic, Internet, and Digital Marketplace Supply) tax regulations in 2023.
“With regulatory clarity now in place, and following guidance from the Kenya Revenue Authority (KRA) and the National Transport and Safety Authority (NTSA), we have decided to introduce the VAT obligation,” reads the statement in part.
“This step reflects Bolt’s ongoing commitment to regulatory compliance and responsible business operations within the Kenyan digital economy.”
The development may trigger fresh friction between Bolt and its drivers, who until August last year had piled pressure for months protesting low fare prices charged on the platform.
Bolt responded by raising its base fare across all its ride categories by 10 percent, a gain that is set to be watered down by the tax burden transfer that will require drivers to submit commission to the platform with an additional 16 percent charge.
The taxation regulations were first published by the Treasury in October 2020, subjecting non-residents supplying electronic services to Kenyan individuals – business to consumer (B2C) – to VAT at a 16 percent rate.
They were then tabled before the National Assembly in February 2021 before becoming effective on April 1 of the same year.
The Finance Act 2022, however, amended the VAT Digital Marketplace Supply (DMS) regulations by removing the distinction between business-to-business (B2B) and B2C.
This change meant that recipients of B2B supplies from non-resident suppliers could no longer rely on the reverse charge mechanism for VAT compliance in Kenya.
The Act also demanded that non-resident suppliers of taxable services via a ‘digital marketplace’ must register for VAT in Kenya at the standard rate of 16 percent on all relevant supplies.
The VAT DMS regulations would later be revoked and replaced with the VAT (Electronic, Internet, and Digital Marketplace Supply) regulations in 2023 to take account of additional changes in relation to the taxation of supplies through a digital marketplace.