Safaricom is the largest telecommunications provider in Kenya, and one of the most profitable companies in the East and Central Africa region.
The telecom company is cautious about its decision to separate its internal reorganization process M-Pesa from its telecom business due to what the Kenya Revenue Authority (KRA) might do especially regarding its taxation such as capital gain tax (CGT) if the separation persisted.
As a vote of confidence, the company maintained that it would pursue government tax waivers before proceeding with the plan to create a new group structure that will see M-Pesa and the telecommunication business run separately.
Safaricom CEO Peter Ndegwa says in a transcript of the telco’s investor call made on November 11 last year that the listed firm would need government support “in terms of tax reliefs and so on to be able to go that direction.”
“There is clearly quite a lot of work to do in terms of tax and legal structures that would need to be overcome, in particular tax, because the current tax law almost treats internal reorganisation as if there were external disposals,” said Mr Ndegwa.
“We do need approvals if we’re going in that direction so that we don’t have to pay VAT (value added tax) or withholding tax or whatever in order for us to be able to reorganise the way we intend to.”
Mr Ndegwa says while the board is yet to approve the transaction to separate the two businesses, it has given support to the management to work towards that.
