KRA asks for Sh 677 million from Car General C&G

The Kenya Revenue Authority KRA is asking for Sh 677 million from Car General C&G with the parties disagreeing on the legal basis on which the taxman calculated the sum.

The tax demand is equivalent to 76.3 percent of the diversified trading company's net profit of Sh 887.2 million in the year ended September 2021.

The unpaid tax accrued over the six years ended 2020 and was caused by the company's three-wheeler or tuk-tuk business.

The KRA issued a customs tax assessment during the year of 677 million, excluding interest and penalties. The Nairobi Securities Exchange-listed firm says in its latest annual report that this assessment is in relation to the company's tariff classification for three wheelers for the years of income 2015 to 2020.

C&G objected to the tax assessment at the Tax Appeals Tribunal TAT, which took issue with specific matters of application and interpretation of tax legislation affecting the company and industry in which it operates. The company s favor was given in October 15, 2021 because of the objection and the decision was made on October 15, 2021 by the tribunal. The KRA is still intent on collecting the alleged unpaid taxes.

The TAT judgement was appealed by the KRA on December 6, 2021. The directors considered all matters in contention with the help of professional advice 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 of dollars.

Some companies have settled their disputes with the KRA but most of the disputes are usually resolved by the courts or the tribunal, with companies fighting the tax claims for years at a time.

The tax demand was helped by higher revenues, as C&G posted strong earnings growth in the year ended September 2021.

Revenue surged 41.4 percent to 17.1 billion, and more than tripled its net income to Sh 887.2 million.

The dividend payout was quadrupled to Sh 3.2 per share, besides proposing a one-for-one bonus share.

The company had paid a dividend of Sh 0.8 per share for the previous year. The proposed distribution will be made on March 24 to shareholders on record as of February 25.