Co-operative Bank Loses Ksh 621 Million Tax Dispute To KRA

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Co-operative Bank PHOTO/Courtesy

Kenya Revenue Authority (KRA) has won a Ksh 621 million tax case against Co-operative Bank of Kenya, Business Daily reported.

The tax dispute arose from financial transactions made by the bank between 2013 and 2015.

At the same time, the new ruling made by Justice David Majanja followed another which had barred KRA from collecting the amount.

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KRA appealed the decision arguing that agency fees and commissions earned from money transfer services were subject to excise duty.

In his ruling, Justice Majanja confirmed that indeed, all fees such as a moratorium and loan appraisals are subject to excise duty while the interest earned from the loan would be exempted.

“Consequently, the part of the tribunal’s judgment holding that the fees charged by the respondent that are ancillary to the loans it grants to its customers are in the ambit of interest and therefore exempt from excise duty be and is hereby set aside,” he said.

KRA said Co-operative Bank failed to deduct excise duty for loan applications and moratoriums, commissions, fees and interest earned in the three years to 2015.

This comes barely a year after KRA lost a Ksh 800 million tax dispute case against Equity Bank Group Holdings.

KRA was demanding the money as capital gains tax from asset transfers by the lender in 2014.

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However, commercial Court judge John Mativo allowed Equity’s appeal after finding that the commissioner of domestic taxes failed to render his decision within the timelines set by the law.

In the case, Equity Group asserted that it never benefited from transferring its assets to Equity Bank Kenya Ltd (EBKL), but KRA insisted the former gained Sh34b, which ought to be taxed.

The lender argued that KRA erroneously tabulated the capital gains tax and wrongly affixed January 14, 2015, as the day the transfer was completed.

“It is a common ground that the transaction involved the transfer of the banking business from the respondent (EGHL) to a new subsidiary Equity Bank Kenya Ltd so that the respondent becomes a non-operating holding company of the Equity Group of Companies,” argued Equity lawyers.

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