Digital lenders have moved to court seeking to revoke the 20 percent excise tax on loans advanced to online borrowers.
Through their umbrella body – Digital Finance Services Association of Kenya, the lenders want the court to issue orders barring the Kenya Revenue Authority from collecting or demanding payment of excise duty on fees charged on loans.
The new law was introduced following an amendment to the Excise Duty 2015 of the Finance Act, coming into operation on 1st of July 2022.
The lenders say the imposition of the tax prompted an increase in the cost of mobile loans.
Digital Finance Services Association of Kenya says the new tax unfairly discriminates against its members as compared to other financial institutions.
“As a result of the disputed amendment, digital lenders are denied the statutory benefits of excluding interest from the tax base for the 20 percent excise duty applicable on transactions with their customers- a benefit which other financial institutions, including non-digital lenders, enjoy under Excise Duty Act,” says the association.
Digital loans are obtained via mobile banking such as M-Shwari of the Safaricom mobile network operator or smartphone applications such as Tala.
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