A United Arab Emirates (UAE)-based tea trading firm owned by Chai Trading Company (CTCL), a wholly owned subsidiary of the giant Kenya Tea Development Agency (KTDA) Holdings Ltd, has lost a fight to block a Sh122.67 million tax claim by the Kenya Revenue Authority (KRA).
The Tax Appeal Tribunal (TAT) said that KRA was justified to demand tax from the UAE-based KTDA Dubai Multi Commodities Centre, because some of the firm’s operations took place in Kenya.
“The Tribunal having found that the Appellant (KTDA Dubai Multi Commodities Centre) was resident for tax purposes in Kenya, also finds that the taxes demanded were due and payable and that the objection decision by the Respondent (KRA) dated June 9, 2023, was justified,” the Tribunal chaired by Christine Muga said.
“The upshot of the foregoing is that the Appeal is not meritorious ……The Appeal be and is hereby dismissed.
The feud draws back to sometime in 2021 after the taxman conducted an audit of KTDA Dubai Multi Commodities Centre and its parent company, CTCL for the period 2015-2021.
KRA issued a letter of its preliminary findings on December 9, 2022, and on February 17, 2023, the KTDA firm responded to the outcomes.
The taxman thereafter, on March 15, 2023, issued a default notice assessment for Sh120,093,511. The CTCL subsidiary however rejected the KRA notice through a letter dated April 12, 2023, triggering a dispute with the taxman, which demanded that the tea firm pays Sh122,672,965 in tax assessment for the period between 2018 and 2020.
Aggrieved by the KRA’s decision, KTDA Dubai Multi Commodities filed an appeal on July 14, 2023, in which it claimed that KRA erred in law and fact, by holding that it was a resident in Kenya for purposes of tax for the years 2018-2020.
It also argued that the taxman erred in law and fact by holding that it carried on or exercised its business partly within and partly outside Kenya.
“That the Respondent erred in law and fact by holding that the law required the Appellant to impose withholding tax on management fees and other payments,” the firm further said in its submissions.
KRA however maintained that it reviewed the KTDA firm’s operations for the period 2015 to 2020, and found that it was deemed to be tax resident in Kenya by virtue of the management and control of its affairs being exercised in Kenya.
The taxman said that as evidenced by the Board of Directors meeting minutes, KTDA Dubai Multi Commodities’ directors sitting in Kenya were involved in the day-to-day running of its affairs whilst in Kenya, noting that the major discussion points of the Board of Directors meetings were; reviews of the performance of the ppellant, reviews of the credit policies and debt management, and market expansion strategies.
The TAT sided with KRA noting that the KTDA was bound by Kenya tax laws.
“The Tribunal’s finding is that in the instant case, the Appellant was managed and controlled from Kenya since its Board Meetings, the organ through which it made both its strategic and final decisions on the management of the Appellant, were held in Kenya,” the Tribunal said.
“The Tribunal further finds that the regional manager was the employee of the Appellant and was running the entity in Dubai on behalf of CTCL which was in full management and control of the affairs of the Appellant on account of the fact that it fully owned the Appellant and was the beneficial owner” it added.
