kenya: Safaricom Seeks Income Tax Act Amendment to Exempt M-Pesa Fees from eTIMS

Safaricom is advocating for amendments to the Income Tax Act to exempt M-Pesa transaction fees from the Kenya Revenue Authority’s (KRA) Electronic Invoice Management System (eTIMS). The telecommunications giant argues that generating paperwork for the millions of daily transactions is an arduous task.

Safaricom proposes that M-Pesa transaction charges be considered deductible expenses, sparing users from the burden of generating large volumes of electronically generated invoices in eTIMS. A tax deductible is an expense that can be subtracted from adjusted gross income, reducing taxable income and thereby the amount of taxes owed.

“M-Pesa services such as withdrawing cash, sending e-money, and purchasing prepaid airtime incur transaction fees. Transaction volumes of this type run into millions on any given day,” Safaricom stated in its presentation to the Planning and Finance Committee of the National Assembly on the Finance Bill 2024.

In a typical month, the M-Pesa platform completes approximately 200 million transactions. Safaricom emphasized that generating electronic tax invoices for each of these transactions requires a seamless integration of various systems from both Safaricom and the KRA.

The Finance Act 2023, effective January 1, 2024, amended Section 16 of the Income Tax Act, stipulating that only invoiced expenses supported by eTIMS will be admissible for income deduction purposes.

Disclosures from Safaricom indicated that the value of M-Pesa transactions in the 12 months ending March 2024 remained steady compared to the previous year. On average, M-Pesa platform transactions averaged Sh110.25 billion daily.

Safaricom also contends that fees incurred in mobile money transactions should be treated like fees related to other financial services, thus exempt from eTIMS invoice requirements. The telco warned that failing to exempt these transactions could derail crowdfunding efforts for charitable enterprises in Kenya.

“The requirement to issue electronic tax invoices applies to persons conducting business in Kenya. However, most charities do not engage in income-generating activities and are therefore not required to issue electronic tax invoices. Potential donors will avoid donating to such charities as they are not incentivized through income tax deductions,” Safaricom told the committee.

The Finance Bill 2024 proposes to tighten the implementation of eTIMS by amending the Tax Procedures Act, which includes a hefty fine of Sh2.0 million per month for failing to integrate systems with eTIMS for electronic invoice generation.