Kenyan tax man after Keroche’s neck for failing to remit US$3.08m excise duty levied, collected from its alcoholic beverages

KENYA – One of the longest tax disputes in the Kenya involving Keroche Breweries and the Kenya Revenue Authority (KRA), has escalated to tense levels with the tax man locking the brewers’ doors and leaving it out in the cold.

Setting the records straight, KRA highlighted that Keroche has consistently failed to honour agreements reached between the two parties leading to the closure of its premises since February 1, 2022.

At the centre of this latest dispute is the Kshs. 351 million (US$3.08m) KRA says the brewer owes and which KBL says amounts to Kshs. 322 million (US$2.82m) contradicting the authority’s figure which led to closure of its premises.

“On the issue relating to Kshs. 351 million (US$3.08m) taxes due and prominently highlighted by Keroche Breweries Ltd as being the main reason that led to the recent closure of the premises, it is imperative to note that this is principal tax which Keroche withheld for the period January 2021 to date and has not remitted the same to KRA.

“This means that Keroche Breweries Ltd has been collecting Excise Duty Tax and VAT from its consumers through the sale of its products but has not been remitting the taxes to KRA,” said KRA.

KRA says, by December 14, 2021, this amount stood at Kshs. 279.96 million (US$2.45m) which Keroche offered to pay in instalments of Kshs. 20 million (US$180,000) beginning January until October 2022.

Subsequntly, the brewer also agreed to pay another Kshs. 30 million (US$260,000) in November and Ksh 49.96 million (US$440,000) in December to clear the tax arrears.

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Howevever, KRA says Keroche only paid Kshs. 10 million (US$87,000) and dishonoured the agreement.

On her part, Keroche Chief Executive Officer Tabitha Karanja on blamed KRA for frequent closure of its premises in a bid to recover pending taxes which have happened thrice.

The factory has remained closed from February 1, with over two million litres of beer worth about Sh 512 million in its tanks, which have fixed costs to a tune of about Sh30 million required to maintain the same monthly.

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“This has drained all our resources and unfortunately if nothing is done in the next seven days, we will be forced to drain down all the beer and lay down over 250 direct employees and thousands within our nationwide distribution network,” she said yesterday.

The stand-off between Keroche and KRA can be traced back to the Ksh7.54 billion (US$66m) tax demand revolved around its production process, comprising principal tax of Kshs. 4.5 billion, penalty of Ksh. 66.9 million (US$586,000) and interest of Kshs. 2.98 billion (US$26.12m).

The dispute involves its Vienna Fortified wine which the brewer stopped manufacturing in 2007 after demand of alleged accrued tax following the tax man’s reclassification of the drink to a higher tax tariff and backdating uncollected taxes.

Keroche later introduced Vienna Ice Vodka in 2014 which KRA disputed the formula used in taxing in regards to its manufacturing process.

Keroche Breweries has since applied to the National Treasury seeking abandonment of taxes amounting to Kshs. 3.9 billion (US$34m).

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