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Permanent establishments risk in Kenya: The dependent agent dimension in the Travelport services case

When it comes to permanent establishments, substance trumps form. Businesses with cross-border operations cannot rely on the contractual labelling of functions alone, therefore, if a contract describes local functions as auxiliary, those functions must genuinely be auxiliary in practice. Where the Kenya Revenue Authority (KRA) examines the true nature of those functions and finds them to be core to the business, a permanent establishment (PE) determination will follow, giving rise to tax obligations. In the recent decision in Travelport Services (Kenya) Limited v Commissioner of Legal Services & Board Coordination the Tax Appeals Tribunal (Tribunal) outlined functions that give rise to a PE, particularly, a dependent agent PE. This alert discusses what the decision means for businesses with Kenyan operations.