KRA, SportPesa fight over seizure of Sh1bn in telcos

The row was triggered on April 30 after the KRA fired agency notices to the five lenders and the two telcos, seeking to recover unpaid excise duty directly from the bank accounts and pay-bills at M-Pesa and Airtel money.

An agency notice is an order from the KRA to third parties such as banks, employers, or debtors, to freeze the taxpayer’s account and directly remit funds to the agency to settle outstanding tax.

The fresh tax row comes seven years after the pursuit of Pevans East Africa, which then operated the SportPesa brand, over unpaid taxes and an increase in levies forced the betting firm to close shop.

Milestone Games reckons that the agency notices were sent to the banks and telcos at 4pm in an effort to paralyse its operations.

The tribunal has ordered the KRA to withdraw the notices pending the conclusion of Milestone Games’ appeal against the Sh1 billion demand.

“It follows that, once a taxpayer has lodged its appeal before the tribunal relating to a dispute on assessed taxes, the respondent is prohibited by law from issuing agency notices as mechanisms in recovery of the disputed taxes,” the tribunal ruled.

“The agency notices issued by the respondent on 30th April to the appellant bankers and telco partners be and are hereby lifted unconditionally.”

Section 42 of the Tax Procedures Act empowers the KRA to deactivate PINs, issue travel bans, collect cash due from the taxpayer’s banker and prosecute executives for defaults and evasion.

The gaming companies rely on telecoms operators’ network to take bets, communicate with users and process payments on mobile cash platforms like M-Pesa and Airtel Money.

Each betting firm is assigned a unique number or paybill, which is used to process payments from users who place bets on their mobile phones and to pay off those who win.

Customers using basic feature phones rely on short codes assigned to each betting company.

In November 2019, SportPesa halted operations due to a drastic hike in taxes on betting stakes and a multi-billion shilling demand from the KRA.

Pevans East Africa, the original owner of the SportPesa trademark, would later transfer the brand to UK-based Sportpesa Global Holding Limited (SGHL).

Milestone Games was subsequently assigned the right to use the SportPesa trademark in Kenya by Sportpesa Global in the roundabout deals, sparking shareholder fights in Pevans East Africa.

Now, Milestone Games is locked in a fresh tax suit with the KRA.

It moved to the tribunal in February 2026 after the KRA demanded Sh1,011,230,716 in excise duty on bets placed by customers, calculated at 12.5 percent of the amount staked, and a further Sh462,991 in withholding tax on betting winnings for the period between June 2023 and February 2024.

Milestone Games argues that the KRA acted unlawfully by issuing agency notices despite a pending appeal and an earlier tribunal decision involving the same parties over similar issues.

According to court filings, the betting company objected to receiving the assessment issued on September 29, 2025.

It argues that the KRA failed to determine the objection within the statutory 60-day period provided in the law.

“The respondents did not make any decision on the notice of objection... within the 60 days... and therefore the objection stood allowed by operation of law,” Milestone Games says in its application.

The company further argues that the KRA’s objection decision dated January 5, 2026, was issued outside the statutory deadline and could not lawfully sustain the disputed assessment.

As a precaution, however, Milestone Games proceeded to file the present appeal before the tribunal to challenge the assessment formally.

It also accused the KRA of deliberately issuing the agency notices late on a Friday at 4.00pm to deny it an opportunity to seek immediate court intervention.

“The timing of the issuance of the agency notices on a Friday at 4.00pm was meant to deny the appellant a chance to move to court/the tribunal to protect its constitutional rights, thereby paralyzing its business operations,” it says, accusing the taxman of “malice, bad faith and ulterior motives”.

It adds that the agency notices were also extended to banking institutions where the betting firm did not hold accounts.

The KRA opposed the application, arguing that the tribunal lacked jurisdiction to issue injunctive orders and argued that Milestone Games had already obtained similar relief from the High Court.

The tribunal rejected those arguments, finding that Milestone Games had already filed a substantive appeal challenging the KRA’s objection decision and that the appeal raised arguable issues deserving a full hearing.

“The applicant filed an appeal at the tribunal on February 16, 2026, challenging the respondent’s decision of January 5, 2026. The tribunal has perused the applicant’s memorandum of appeal and is persuaded that the applicant has an arguable appeal which ought to be heard and determined on its merits,” the ruling says.

The tribunal also relied on Section 42(14) of the Tax Procedures Act, which restricts the KRA from issuing agency notices where a taxpayer has appealed against the disputed assessment.

Although the KRA argued that it had already withdrawn the notices, the tribunal found that the tax authority had merely suspended them rather than lifted them outright.

“The tribunal affirms that institution of recovery measures ought to be done in strict compliance with the law, hence the same cannot be left to the respondent to whimsically institute and lift agency notices as it so wishes. It must only do so within the bounds of the law,” the ruling says.

“In the interest of justice,” it ruled, the recovery process should remain suspended until the tax dispute is determined.

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