Kenya Revenue Authority Loses Tax suit Against Airtel Kenya

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A while back, we told you that the Kenya Revenue Authority had filed a suit against Airtel Kenya seeking Kshs. 531 Million in back taxes from its license.  Airtel Kenya was first issued with the license in 2000 for 15 years when it launched operations locally as Kencell. The company has over the years changed ownership and subsequently re-branded as Celtel, then Zain and now Airtel Kenya. The company initially purchased its operating license for Kshs. 5.6 Billion.

KRA stated that Airtel Kenya, then Kencell failed to classify its purchase of the license as an initial capital cost (charges a firm incurs when starting a business). The telco instead recorded it as revenue expenditure which is an operational cost deductible from the company’s income tax thus making the company liable. The matter pitting Airtel and KRA began in 2005 when the two appeared at the KRA tribunal where Airtel won the matter. KRA then challenged the decision at the High Court for which the ruling has since been delivered. In the delivery of the ruling, the court stated that there was ambiguity in KRA’s demands and as such the court has to side with the taxpayer.

The suit is definitely a big boon for Airtel Kenya, which still is still grappling with the matter of its operating license. Airtel Kenya’s license expired in February 2015  and is yet to renew its license with the Communication Authority of Kenya. Airtel Kenya is currently using the license issued to Essar Telekom YU, whose operating license and subscribers it acquired. Communication Authority charges a renewal license fee of Kshs. 2.3 Billion, Kshs. 30.2 million for initial annual operating fees, outstanding frequency fees of Kshs. 24.9 million and in the case of Airtel Kenya, there will likely be a penalty payment of Kshs. 1.5 million.

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