Airtel Kenya Loses Kshs. 531 Million Tax suit Against Kenya Revenue Authority

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A while back, this blog ran a story that the Kenya Revenue Authority had filed a suit against Airtel Kenya seeking Kshs. 531 Million in back taxes for 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 was delivered for which KRA lost. 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.

KRA appealed the matter on which a ruling was delivered, which may force Airtel Kenya to pay the amounts. In addition to these payments, Airtel will still have to pay for its license in the coming year. The telco has been 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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