Lecture 97 ยท Nakumatt called its loyalty-points payment a sale, and the court held it was a management fee to withhold on.
๐ป๐๐ ๐ช๐๐๐ ๐น๐๐๐: Nakumatt paid a technology firm a shilling on every loyalty point it ran, and treated it as a loss on a sale of points. The courts read the contract, found a firm managing the whole scheme, and held the shilling was a management fee subject to withholding tax, a KSh 128 million bill.
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You hire a technology firm to run your customer loyalty scheme, its cards, its machines, its systems, and you pay it a margin on every point. In your books you treat that margin as a loss on buying and selling points. The tax authority reads the contract and sees a firm managing a service, and wants withholding tax on the fee.
Put yourself in the finance director's chair. When you pay a firm to run your loyalty scheme, is that payment a loss on a sale, or a management fee the authority can withhold on?
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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 ยท A director kept meeting the taxman instead of appealing, and four years on the bill had only grown.
๐ป๐๐ ๐ช๐๐๐ ๐น๐๐๐: 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 ยท 4 min read ยท Paid
Lecture 125 ยท A rice importer called cleaning and repacking manufacturing, and the court said packaging is not making.
๐ป๐๐ ๐ช๐๐๐ ๐น๐๐๐: 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 ยท 4 min read ยท Paid
Lecture 124 ยท A contractor said the money was his clients', had no agreements to show it, and the assessment stood.
๐ป๐๐ ๐ช๐๐๐ ๐น๐๐๐: 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 ยท 4 min read ยท Paid