The Tax Appeals Tribunal (TAT) has dismissed an appeal by Naivas Kenya Limited (NKL) against the payment of corporate tax of Kshs 1.8 billion that had accrued from the sale of its 30.0% minority stake.
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In 2020, Gakiwawa Family Investments Limited (GFI), who initially owned a 100.0 per cent stake in Naivas International Limited (NIL), sold a 30.0 per cent minority stake to private equity firm Amethis Retail for Kshs. 5.2 Billion.
In the appeal, NKL objected to the Kenya Revenue Authority (KRA) assessment that stated that Naivas Kenya Limited was appointed as tax representative for GFI, given that GFI was incorporated in Mauritius.
Naivas Kenya Limited noted that they were not tax representatives of GFI, and there was no relationship between themselves and GFI. Therefore, they would not legally and practically be able to carry out any obligations as GFI tax representatives.
KRA, on the other hand, noted that the control and the management of the holding company that owns Naivas supermarkets is exercised by directors who are Kenyans and work and reside in Kenya.
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After hearing the parties, the tribunal was of the view that since GFI is managed and controlled in Kenya, they were tax residents in Kenya and, therefore, NKL was liable to pay corporation tax as assessed by KRA.
Consequently, the tribunal dismissed the appeal filed by NKL and upheld the KRA TAX assessment. NKL is, therefore, liable to pay the corporation tax of Kshs 1.8 billion inclusive of penalties and interest.
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