KENYA – Naivas Supermarkets Limited, Kenya’s largest retailer by total store count, is facing a new tax demand from the Kenya Revenue Authority amounting to US$12.56 million (KES1.79 billion), reportedly accruing from the 2020 stake sale. 

The heirs of Naivas’ founder, the late Peter Mukuha Kago, sold a 31.5% stake to Amethis Retail — a consortium which comprised International Finance Corporation, German fund DEG and private equity firms Amethis and MCB Equity Fund. 

According to KRA, the heirs through their investment vehicle Gakiwawa Family Investments structured the deal – where they received KES5.2 billion- in Mauritius to avoid taxes in Kenya.   

“In a layered and complicated scheme involving holding companies and subsidiaries, KRA unearthed a scheme to avoid payment of corporation tax in Kenya,” KRA said in a press statement.  

“It was, however, revealed by KRA and ruled by the Tax Appeals’Tribunal that although the Gakiwawa is incorporated in Mauritius, the control and management of the holding company that owns Naivas Supermarkets is exercised by its directors who are Kenyan, in Kenya.” 

Naivas Limited is now required to pay the corporation tax assessed at Sh1.79 billion, inclusive of penalties and interest after its appeal at the Tax Appeals Tribunal was dismissed, said the KRA.  

The transaction that has attracted the tax demand is among several that were initiated by the family to reduce their ownership in the retailer, earning billions of shillings. 

 In June last year, the Amethis Group and the Mukuhas sold a combined 40 percent stake in Naivas to a consortium led by Mauritius-based conglomerate IBL Group for $151.97 million (KES21.8 billion at current exchange rates). 

 The shares sold in the deal included an additional 8.5 percent stake that the family sold for $32.29 million (KES4.6 billion). 

 The money was spent on fuelling the retailer’s growth across the country, with the ownership of the Mukuhas falling to 68.5 percent but becoming more valuable. 

 IBL recently announced plans to buy an extra 11 percent stake in Naivas from the Mukuhas in a transaction estimated at US$41.7 million (Sh5.9 billion). 

The deal will see the Mukuhas’ interest in the supermarket chain drop from the current 60 percent to 49 percent and will result in Mambo Retail Ltd holding 51 percent of the shares in Naivas International Ltd. 

Mambo Retail is the investment vehicle through which IBL, French fund Proparco and German fund DEG currently hold a 40 percent stake in Naivas International, which in turn fully owns the operating subsidiary Naivas Limited. 

For all the latest food industry news from Africa and the World, subscribe to our NEWSLETTER, follow us on Twitter and LinkedIn, like us on Facebook and subscribe to our YouTube channel.