A UAE-based tea trading company owned by Chai Trading Company (CTCL), a wholly-owned subsidiary of giant Kenya Tea Development Agency (KTDA) Holdings Ltd, has lost a battle to prevent a Sh122.67 million levy. Claim from Kenya Revenue Authority (KRA).
The Tax Appeal Tribunal (TAT) said KRA was justified in seeking tax from UAE-based KTDA Dubai Multi Commodities, because some of the company’s operations are in Kenya.
“Having found that the appellant (KTDA Dubai Multi Commodities Centre) was resident for tax purposes in Kenya, it also found that the taxes claimed were due and payable and that the objection decision by the respondent (KRA) was dated 9 June 2023,” the court presided over by Christine said. Moga: “It was justified.”
“The result of the above is that the appeal is without merit…The appeal is hereby dismissed.
The dispute dates back to sometime in 2021 after the tax official conducted an audit of KTDA Dubai Multi Commodities Center and its parent company CTCL for the period 2015-2021.
KRA issued a letter with its preliminary findings on December 9, 2022, and on February 17, 2023, KTDA responded to the findings.
The Tax Officer then, on 15 March 2023, issued an assessment of the Notice of Default at Sh120,093,511. However, the CTCL subsidiary refused to notify the KRA through a letter dated April 12, 2023, sparking a dispute with the tax official, who demanded that the tea company pay Sh122,672,965 as tax assessment for the period between 2018 and 2020.
Aggrieved by the KRA’s decision, KTDA Dubai Multi Commodities filed an appeal on 14 July 2023, alleging that the KRA erred in law and fact, by deeming it resident in Kenya for tax purposes for the years 2018-2020. .
It also argued that the taxman erred in law and fact when he held that he continued or carried on his business partly within Kenya and partly outside it.
The company further said in its submissions: “The respondent erred in law and fact when it held that the law required the appellant to impose a withholding tax on management fees and other payments.”
However, the KRA confirmed that it had audited KTDA’s operations for the period from 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 exercised in Kenya.
The tax officer said that as evident from the minutes of the Board of Directors meeting, the directors of KTDA Dubai Multi Commodities based in Kenya were involved in the day-to-day management of its affairs while in Kenya, noting that the main discussion points for the Board of Directors meetings were; Reviews of the appellant’s performance, reviews of credit and debt management policies, and market expansion strategies.
TAT sided with KRA stating that KTDA was bound by Kenyan tax laws.
“The court’s finding is that in this case, the appellant was managed and controlled from Kenya since the meetings of its board of directors, the body through which it made its strategic and final decisions on the management of the appellant, were held in Kenya.” The court said.
“The court also finds that the regional manager was an employee of the appellant and was managing the entity in Dubai on behalf of CTCL which had full management and control of the affairs of the appellant due to the fact that it wholly owned the appellant and that he was the beneficial owner.
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