KENYA – Mount Kenya Breweries (MKB) has faced a significant setback as a tribunal upheld a Ksh 2.79 billion (US$21.37M) tax demand against the company issued by the Kenya Revenue Authority (KRA).
The five-member Tax Appeals Tribunal deemed the demand justified, emphasizing that the brewery’s non-declarations of full purchases were fraudulent and warranted an audit beyond the typical five-year limitation period.
The tribunal stated that MKB’s explanations for the non-declarations were inadequate. It noted, “The non-declarations by the company of the full purchases cannot be explained or justified and accordingly have to be construed as fraudulent to which the Commissioner was entitled to audit beyond the five-year limitation period.”
MKB, a manufacturer of products including Blue vodka, Chivalry brandy, Yala beer, and Sparkler spirits, challenged KRA’s assessment in March 2022. The investigations covered the period from 2015 to 2021.
MKB contested the assessment, arguing that some audits exceeded the five-year limit and that tax demands coincided with periods when a government multi-agency team shut the factory down.
The company also claimed that the additional tax assessments were based on incorrect ethanol purchase volumes. The brewery argued that KRA made unsubstantiated claims regarding massive ethanol purchases.
However, evidence presented to the tribunal showed that KRA issued additional tax assessments for excise tax, VAT, and income tax totaling Ksh 4.9 billion (US$37.53M), including penalties and interest.
MKB’s objections were rejected by KRA, confirming the principal taxes of Ksh 2.792 billion (US$21.39M).
KRA’s investigations revealed ethanol purchase data from MKB’s local suppliers, such as Agro-Chemicals Limited, Kibos Limited, and Mumias Sugar Company Limited, along with import data.
The reconciliations of these declarations indicated that MKB had under-declared its production by 9,683,280 litres.
Additionally, the tribunal acknowledged MKB’s claims of losses due to a 2017 fire that destroyed large quantities of excisable finished goods, raw materials, and other business assets.
However, it found that the brewery’s allegations regarding KRA’s flawed method—failing to consider excise duty rebates, breakages, spillages, and the fire incident—were not fully substantiated.
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