Tax Demand Hits Peter Kenneth Bank and Others: Sh1.1bn Impact
Former contender for the presidency, Peter Kenneth, along with three businesses, one of which is a bank, are the most recent notable individuals and organizations to become embroiled in the ongoing efforts by the Kenya Revenue Authority (KRA) to enforce tax compliance.
GossipA2Z.Com has confirmed that the Kenya Revenue Authority (KRA) is requesting over Sh1.14 billion from the owners of three firms, including Mr. Kenneth, due to insufficient tax payment related to the sale of shares.
As per the KRA, a document internal to GossipA2Z.Com reveals that these investors provided a combined payment of Sh569.9 million for the shares they sold, rather than Sh1.7 billion.
The tax authority believes that both individuals and businesses, which comprise 37 shareholders of Mayfair Bank, submitted capital gains tax (CGT) reports for the transfer of shares that occurred in December 2022 but were only completed in 2023. As a result, they are suspected of not accurately reporting the correct tax amounts.
By the conclusion of December in the previous year, the taxation rate for capital gains on the sale of unquoted shares, property, and intangible assets like software and business goodwill was reduced to 5.0 percent.
Nevertheless, starting from January, this was increased threefold to 15 percent as the government aims to target the thriving real estate sector and the rapid pace of corporate consolidations.
The KRA asserts that these taxpayers sold their shares in the three companies, which incurred Capital Gains Tax (CGT) in December of the previous year, for transactions that were finalized in the current year.
“A transfer occurs when property is sold, exchanged, conveyed, or disposed of in any manner. The due date (tax point) for capital gains is upon registration of the transfer instrument in favor of the transferee,” says the letter.
“Analysis of CGT data revealed that some taxpayers fraudulently filed CGT returns for transfer of shares in December 2022, before the actual transactions had taken place, to pay CGT at five percent, therefore, evading payment of CGT at 15 percent (effective 1st January 2023).”
Issues arose for Mr. Kenneth and 36 additional executives at Mayfair Bank when they attempted to settle their tax obligations after selling their shares in the bank.
KRA has pointed out that the completion of the sale of the remaining 49 percent ownership in Mayfair CIB Bank to Egypt’s Commercial International Bank occurred on January 31st.
The individuals who offloaded their last portions in Mayfair to CIB, including Mr. Kenneth, attorney Ambrose Rachier, and urban magnate Amos Gichuki Ngonjo, are reported by the tax authority to have paid Capital Gains Tax (CGT) totaling Sh139.95 million, as opposed to Sh419.9 million.
The Kenya Revenue Authority (KRA) is requesting a sum of Sh279.97 million from individuals who are shareholders of Mayfair. These shareholders had collectively received $40 million (equivalent to Sh5.75 billion) from the sale of their remaining shares in the small financial institution to CIB.
Upon communication, Mr. Kenneth mentioned that an arrangement had been reached between the shareholders and the KRA to address the tax debt through a payment schedule. He also noted that the initial payment has already been made.
It’s been reported that the shareholders and the KRA have reached an agreement to settle the outstanding amount in six smaller payments. Mr. Kenneth emphasized that their payment of the CGT last year was made without any ill intent.
“This is a question of, if I sell you my car, you pay me, I give you the logbook, you don’t transfer,” said Mr. Kenneth, adding that it is CIB that delayed transferring after they handed over the documents before the end of the year.
“But me I have finished with you. You have paid me, then you don’t transfer, then you go and crash somebody then people say the car is still in my name.”
He stated that the agreement was legitimate and attributed their predicament to the buyer’s delays in concluding the transaction before the implementation of the new tax.
The KRA has taken notice of transactions, with one example being the purchase of a controlling share in Harley’s Ltd by the conglomerate IBL Group from Mauritius.
The revenue authorities are requesting a sum of Ksh 520.5 million from investors of a pharmaceutical distribution company located in Nairobi. This financial claim pertains to a deal that was finalized on February 13th.
The tax authorities state that these investors settled a capital gains tax of 260.2 million Kenyan Shillings as opposed to the correct amount of 780.7 million Kenyan Shillings.
The KRA is requesting Sh339.4 million in overdue Capital Gains Tax (CGT) as a result of the purchase of IX Africa Data Centre Limited, a tech company providing data center services.
Lion Investment Bidco Limited (Lion), a registered investment company in Kenya, purchased the shares.
According to the Kenya Revenue Authority (KRA), shareholders of IX Africa underreported their Capital Gains Tax (CGT) payment. They paid only Sh169.7 million instead of the correct amount of Sh509 million by manipulating the transaction date retrospectively.
The queries we sent to representatives of the other two companies had not been answered before the press deadline.
The capital gains tax, which Kenya eliminated during the 1980s to encourage investments, is the fee that investors need to pay on the earnings or profit generated when they sell, gift, or get rid of an asset, including items like shares or real estate such as houses and land.
To generate increased domestic income from the thriving real estate sector and a rapid series of corporate consolidations, the government raised the Capital Gains Tax (CGT) to 15 percent through the Finance Act of 2022.
However, it was not until January this year that the new rate became effective.
Recently, the KRA has been intensifying its efforts to uncover individuals evading taxes, while the Ruto government aims to enhance the generation of internal funds and reduce reliance on borrowing.
The regulatory body is also pursuing a sum of Sh1.79 billion in tax payments from Naivas, which is said to have originated from the sale of a 31.5 percent share in the leading supermarket chain back in 2020.
Tax Demand Hits Peter Kenneth Bank and Others: Sh1.1bn Impact
