KENYA – The Kenya Tax Appeals Tribunal ruled in favor of Coca-Cola East and West Africa, ordering the Kenya Revenue Authority (KRA) to refund Kes670 million (US$4.15M).  

The tribunal held that the marketing and promotional services provided by the company to its foreign affiliate, The Coca-Cola Export Corporation (TCCEC), were subject to VAT at zero-rate, as they were considered exported services. 

The six-member tribunal stated, “From the foregoing and having established that indeed the services offered by the Appellant are subject to VAT at zero-rate, the Tribunal is convinced that the Respondent’s objection decision was not justified.”  

This decision comes after KRA had issued an assessment of Kes502 million (US$3.11M) against the company, claiming that the services were locally consumed and subject to VAT. 

Coca-Cola East and West Africa explained to the tribunal that it had a service agreement with TCCEC to provide marketing and promotion services in Kenya and other Central and East African countries.  

The tribunal acknowledged that the purpose of these services was to enhance the image and importance of Coca-Cola brands, benefiting foreign affiliates by encouraging sales of concentrate. 

The company challenged KRA’s rejection of their VAT refund claim, arguing that the marketing and promotion services were, in fact, exported services and should be zero-rated. 

KRA insisted that the services were locally consumed and paid for by non-resident persons, maintaining their position despite an audit that revealed 99.8% of the company’s sales were declared as zero-rated. 

The tribunal ultimately allowed the appeal, setting aside KRA’s objection decision and assessment, while approving a Sh669,881,942 VAT refund for Coca-Cola East and West Africa. 

HCCB refranchises operations in India 

Meanwhile, Hindustan Coca-Cola Beverages (HCCB), the bottling arm of the Coca-Cola Company in India, announced on Friday that it would refranchise company-owned bottling operations in select territories to local partners in India. 

The Rajasthan market will be owned and operated by Kandhari Global Beverages (it comprises Enrich Agro Food Products and Kandhari Beverages).  Kandhari operates in parts of Delhi, Himachal Pradesh, Haryana, Punjab, Chandigarh, Jammu and Kashmir, and Ladakh. 

The Bilhar market will be owned and operated by SLMG Beverages Pvt Ltd. They are currently operating in Uttarakhand, parts of Uttar Pradesh, Madhya Pradesh, and Bihar. 

The northeast market and select places in West Bengal will be owned and operated by Moon Beverages, which currently handles parts of Delhi and Uttar Pradesh.    

Juan Pablo Rodrigues, CEO, HCCB India, said that the business transfer marks a significant decision for Hindustan Coca-Cola Beverages. 

“It ensures the right level of investments can be undertaken in all parts of the business, while bringing both scale and contiguity to the business. We are in the long-term growth prospects of our beverages business in India and believe this move will help accelerate the Coca-Cola system, enabling us to win in the market and provide greater value to local communities,” he said. 

India is the fifth largest market for the beverage major globally. Coca-Cola currently has 11 bottling partners in India including company-owned HCCB. These partners operate 54 plants in the country. 

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