Safaricom is seeking changes to the Income Tax Act to exempt M-Pesa transaction fees from the Kenya Revenue Authority (KRA)’s electronic Invoice Management System(eTIMS), citing the strenuous task of generating paperwork for the millions of daily transactions.
The giant telco proposes that the M-Pesa transaction charges be deemed deductible expenses to spare users the agony of coming up copious volumes of electronically generated invoices on eTIMS.
A deductible for taxes is an expense that a taxpayer or business can subtract from adjusted gross income, which reduces their taxable income, thereby cutting the amount of taxes owed to the taxman.
“M-Pesa services such as withdrawing cash, sending e-money, buying pre-paid airtime et cetera attract transaction fees. The transaction volumes of this kind are in the tune of millions on any given day," Safaricom said in its submission before the National Assembly’s Finance and Planning Committee regarding Finance Bill 2024.
M-Pesa platform transactions
"In a month, the M-Pesa platform completes approximately 200 million transactions. To generate electronic tax invoices for each of these kinds of transactions, a seamless integration of several systems from both Safaricom’s and the Kenya Revenue Authority’s end is required,” it added.
The Finance Act 2023 amended Section 16 of the Income Tax providing that effective January 1, 2024, only expenses backed by eTIMS invoiced will be deemed admissible for income deduction purposes.
Disclosures by the telecommunications firm indicated that in the 12 months ended March 2024 alone, the value of M-Pesa transactions stood at the previous year.
This means that on average, the M-Pesa platform transactions averaged Sh110.25 billion daily.
Mobile money transactions
Safaricom further says fees incurred in the undertaking of mobile money transactions should be handled the same way fees related to other financial services are treated and, therefore, be accorded exemption from the requirement of being backed by eTIMS invoices.
The telco said given that the M-Pesa platform is widely used for mobilisation of resources for charitable undertakings, failure to exempt the platform’s transaction from mandatory eTIMS invoices risks derailing crowdfunding by Kenyans pursuing social and non-profit seeking outcomes.
“The requirement to issue electronic tax invoices applies to persons carrying on business in Kenya. However, most of charitable organisations do not conduct income-generating activities and therefore are not required to issue electronic tax invoices. Potential donors will shun donating to such charitable organisations as they are not incentivised through income tax deductions,” Safaricom told the committee.
Finance Bill 2024 has proposed the tightening of eTIMS implementation through amendment of the Tax Procedures Act providing for a steep penalty of Sh2.0 million per month for failure to integrate one’s systems with eTIMS for the generation of electronic invoices.
