The Kenya Revenue Authority (KRA) is demanding Sh677 million from Car & General (C&G), with the parties conflicting over the legal basis on which the taxman computed the sum.
The tax demand is equivalent to 76.3 percent of the diversified trading company’s net profit of Sh887.2 million in the year ended September 2021.
KRA says the unpaid tax accrued over six years ended 2020 and arises from the company’s three-wheeler or tuk-tuk business.
“In particular, the KRA issued a customs tax assessment during the year of Sh677 million, excluding interest and penalties. This assessment is in respect of the company’s tariff classification for three wheelers for the years of income 2015 to 2020,” the Nairobi Securities Exchange-listed firm says in its latest annual report.
C&G added that it objected to the tax assessment at the Tax Appeals Tribunal (TAT), taking issue with “specific matters of application and interpretation of tax legislation affecting the company and the industry in which it operates.”
The objection went through the tribunal and judgement was issued in the company’s favour on October 15, 2021. KRA, however, is still intent on collecting the alleged unpaid taxes.
“KRA has appealed the TAT judgement on December 6, 2021. With the assistance of professional advice, the directors have considered all matters in contention and are confident that the TAT ruling will be upheld and no material liability will crystallise to the company,” C&G said.
The taxman conducts tax assessments on companies, with some of the reviews resulting in hefty tax demands running into hundreds of millions of shillings or even billions.
Some companies have settled the disputes with the KRA but most of the battles are usually resolved by the courts or the tribunal, with companies fighting the tax claims for years at a time.
C&G revealed the tax demand after posting strong earnings growth in the year ended September 2021, helped by higher revenues.
The company more than tripled its net income to Sh887.2 million as revenue surged 41.4 percent to Sh17.1 billion.The performance saw it quadruple its dividend payout to Sh3.2 per share besides proposing a one-for-one bonus share.The company had paid a dividend of Sh0.8 per share for the prior year. The new proposed distribution will be made on March 24 to shareholders on record as of February 25.
