Keroche Breweries reopens after forging tax payment plan with Kenya Revenue Authority

KENYA – Local Kenyan alcoholic beverages manufacturer, Keroche Breweries, can now breathe a sigh of relief after reaching a new deal with the Kenya Revenue Authority (KRA) which will see it reopen its Naivasha based plant.

In a notice, the tax man highlighted it had reached an agreement with the brewer which will see the firm pay Ksh.957 million (US$8.36m) in undisputed tax arrears for the next 24 months with the first payment backdated to January.

The payment plan which is contained in an addendum agreement to the two Alternative Dispute Resolution Agreements signed between the two parties in 2021 was arrived at and signed on March 14, 2022, after week-long negotiations.

Subsequently, KRA says it will lift agency notices issued to 36 banks which had blocked Keroche Breweries from accessing new financing from lenders to boost its operations.

“We are back to full production after three months of closure and we shall pay Ksh21 million as goodwill, and repay the tax arrears while we pay the monthly taxes,” said Keroche CEO Tabitha Karanja said in response to the notice.

For the last two weeks, the brewer and KRA had engaged in a blame game with Keroche claiming it was being treated harshly.

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.

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“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,” KRA earlier indicated.

This new development comes as a relief to the company which last week appealed to KRA to grant it a grace period of 18 months to clear taxes in arrears while paying the current taxes as they fall due.

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The brewer lamented that the plant closure had further crippled the business that was already in financial distress, risking over 2 million litres of beer worth about Ksh512 million (US$4.47m) in their storage which has a fixed maintenance cost of Sh30 million per month.  

KRA and Keroche have been in a 16-year long tax dispute worth billions of shillings, resonating around the classification of the brewer’s products.

Now as the two enter into yet another agreement, the issue of product reclassification, which has been the bone of contention, remains unresolved.

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