Lecture 58 Β· Del Monte settled a group loan in shares and kept a KSh 401 million exchange-loss deduction.
π»ππ πͺπππ πΉπππ: Del Monte held interest-free group loans in dollars and pounds for eight years, then cleared them by converting the debt into shares. The courts held that the realised foreign-exchange loss was deductible under section 4A whatever the method of settlement, and allowed the full KSh 401 million.
Illustration: Precursor
Your company funds its operations with foreign-currency loans from a sister company abroad. The shilling weakens year after year and the loans swell on your books. When you finally clear them, the paper loss becomes a real one, and you set it against your tax.
Put yourself in the finance director's chair. When you settle a foreign loan by handing the lender shares instead of cash, is the exchange loss still yours to deduct?
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Precursor is published by the FinTech Association of Kenya and exercises independent editorial judgement under the Editorial Independence Charter. This article is labelled Precursor Executive Classroom, which marks commercial material. Knowledge on Tax and financial judgement.
Lecture 126 Β· A director kept meeting the taxman instead of appealing, and four years on the bill had only grown.
π»ππ πͺπππ πΉπππ: KRA confirmed a KSh 899,328 income-tax bill against Saphira, and its director spent four years in meetings and relied on his compliance certificates instead of appealing. The tribunal held meetings do not stop the thirty-day clock, a certificate is not proof of payment, and refused leave to appeal out of time; the debt had grown to KSh 1.4 million.
Tax and financial judgement Β· 4 min read Β· Paid
Lecture 125 Β· A rice importer called cleaning and repacking manufacturing, and the court said packaging is not making.
π»ππ πͺπππ πΉπππ: Mjengo claimed an investment deduction on KSh 1.5 million of machinery that cleaned and repackaged imported rice, calling it manufacturing. Through three forums the ruling held that packaging alone is not making goods, the rice remained rice, and a definition framed with 'means' is exhaustive. The deduction was refused.
Tax and financial judgement Β· 4 min read Β· Paid
Lecture 124 Β· A contractor said the money was his clients', had no agreements to show it, and the assessment stood.
π»ππ πͺπππ πΉπππ: KRA billed MU-BEI KSh 1.7 million after its eTIMS invoices far exceeded its declared sales. The company said the money was clients' funds for materials, passed on as an agent, but had no written agency agreements and no reconciliation. The tribunal held VAT fell due on the invoices and dismissed the appeal.
Tax and financial judgement Β· 4 min read Β· Paid