Kenya Revenue authority

The taxpayer claimed investment deduction for the building and machinery at the rate of 150% of the cost incurred in the financial year 2018/2019 in accordance with Paragraph 24(1)(f) as read with Paragraph 24(2)(c) of the Second Schedule (now repealed) to the Income Tax Act, Cap 470.

KRA disallowed the investment deduction claim of KShs.423,033,494 and demanded for payment of corporation tax amounting to KShs.29,317,209, indicating that the claim could not be made under the period 2018/2019 but in 2019/2020 on the basis that manufacturing commenced in 2019/2020.

KRA’s contention was that the production levels in June 2019 were very low and constituted test runs and not manufacturing.

KRA also indicated that payments made on behalf of foreign contractors in respect of rent, housekeeping and taxi services constituted consultant fees, which fell within the definition of management fees and were subject to withholding tax at non-resident rates, amounting to KShs.1,662,542.

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Kenya Revenue Authority

In 2018, the KRA assessed the Church on the tithes and donations it received. The Church objected to the assessment and KRA subsequently confirmed the assessment in its objection decision.

The Church appealed against the objection decision at the Tax Appeals Tribunal (Tribunal). The Church argued that tithes and donations are not subject to income tax. The Tribunal issued a decision in favour of the Church on 19 February 2020.

KRA appealed against the decision of the Tribunal at the High Court. The High Court upheld the Tribunal’s decision in a judgment dated 31 May 2022.

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Highlands Mineral Water

Highlands Mineral Water Company will now have to pay Kenya Revenue Authority taxes amounting to sh 155.4 million after losing an appeal challenging the same.

The Company had filed its Input tax claim late and hence was disallowed by KRA.

The appellant faulted KRA’s position that input tax is only deductible when VAT returns are filed in accordance with Section 17 (2) of the VAT Act.

The dispute emanated from the KRA’s decision of disallowing the company’s Input VAT claims on self-assessment VAT returns submitted late on account of being time barred contrary to Section 17(2) of the VAT Act due to late filing of the VAT returns inclusive of penalties and interest.

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Seven Seas Technology Limited

The High Court delivered its judgement in the case of Seven Seas Technology Limited vs Commissioner of Domestic Taxes (2017008).

Aggrieved by the Tax Appeals Tribunal (TAT) decision which upheld the foregoing
position, the Appellant lodged its appeal at the High Court.

In this judgement, the High Court made a distinction on what constitutes the right to use copyright in a software over the right to use a copyrighted software.

ISSUES FOR DETERMINATION

I) Whether software embeded in a disk atracts royalties.

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National Bank of Kenya Limited

The Appellant had moved to the TAT seeking to overturn the Respondent’s corporation income tax (CIT) assessment relating to alleged underpayment of CIT for the period 2015 - 2018. The underpayment was as a result of the Appellant’s utilization of tax overpayments from 2014 in offsetting CIT liabilities in later years.

ISSUES FOR DETERMINATION

The issues for determination were whether:

i. The Appellant was entitled to tax credits as per s.42 of the TPA;

ii. It is justified for the Appellant to utilise the tax overpayment to offset tax liabilities in subsequent years; and

iii. The taxes confirmed by the Respondent via the Objection Decision (31 August 2020) were payable.

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