KENYA – Highland Drinks Limited, a Kenyan company manufacturing and marketing non-alcoholic beverages, has been directed to pay Kes403 million (US$2.54M) in taxes to Kenya Revenue Authority (KRA) by the Kenyan tax tribunal. 

KRA sought the amount in Value Added Tax (VAT), corporation tax and excise duty from the company that manufactures and sells carbonated soft drinks, drinking water and cordials in Kenya. 

The dispute arose after the company disclosed a total amount owed of US$1.07 million between 2016 and 2019 under the Voluntary Tax Disclosure Programme (VTDP). 

The KRA initiated investigations and found that the company owed US$5.68 million in taxes with penalties and interest as of December 31, 2021.  

Highland Drinks objected to this figure, leading to a review by the tax authority, which then settled on US$2.54 million in a letter dated June 16, 2022. 

Highland Drinks argued that the KRA miscalculated the tax demands, considering the sales volumes and revenue without accurately reflecting the actual sales volume and price provided by the company.  

The company claimed that KRA erred in classifying cordials as drinks containing fresh fruit juice, subjecting them to an excise duty of Kes10 (US$0.063) per liter. 

The company contested KRA’s refusal to provide the results of samples tested in the laboratory and tariff reclassification, claiming that it infringed on its rights to fair administrative action.  

Highland Drinks also raised concerns about the KRA’s consideration of average selling prices and estimated retail prices instead of specific sale and price dates for the products. 

On the other hand, KRA alleged that Highland Drinks under-declared sales to evade taxes, leading to the assessment of the US$2.54 million owed.  

The taxman argued that the company did not provide opening and closing stock data, and there were discrepancies between production volumes provided during the investigation and in their returns. 

The tribunal noted discrepancies in dispatch and declared volumes, resulting in an overpayment of excise duty of US$1,1970.01 by Highland Drinks and an additional US$396,900.40 paid under VTDP. The company claimed that KRA’s actions amounted to double taxation despite declaring and paying the excise duty. 

The disputed figures for the excise duty of 2018 arose due to the failure to consider January-March, resulting in a total of US$567,000.57. Additionally, KRA reclassified one of Highland’s cordial products after testing samples, leading to an additional excise duty of US$718,200.72. 

Highland Drinks expressed dissatisfaction with KRA’s calculation of VAT and income tax, claiming that the charges were based on expected sales and average selling prices, resulting in an erroneous demand of Kes180 million as VAT and Kes22 million as income tax. 

The company was established in 1954 and its portfolio includes Highlands bottled water, Highlands cordials in orange, pineapple, tropical, mango, and lemon flavors, carbonated drinks; club sodas which come in 10 different variants & energy drink. 

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