The Nairobi Securities Exchange (NSE) is seeking a waiver from the Kenya Revenue Authority (KRA) after the taxman slapped the bourse data vending service with a backdated claim.
The KRA reviewed the NSE’s books in December 2012 for compliance on corporation tax, withholding tax, value added tax (VAT) and pay-as-you-earn and found it had not been paying levies for the data sold to customers.
The NSE was meant to pay Sh19.5 million in principal tax for the period between 2008 and 2011 which was settled in 2012. The exchange, however, disputed the taxman’s assessment for additional tax payable, penalties and interest amounting to more than Sh19 million.
“In 2014, the final assessment by KRA was made on data vending income and other income resulting in additional VAT payable of Sh9.9 million and penalties of Sh4.8 million all of which was provided for in 2014 financial statements,” NSE discloses in a note to shareholders.
The VAT principal tax of Sh9.9 million was settled in June 2015 and an additional penalty and interest of Sh2.9 million was fully provided for in 2015.
In September last year, the NSE then applied for a waiver on all the interest of Sh16.4 million and penalties of Sh2.8 million.
“An amount of Sh17.3 million has already been provided for in these financial statements as well as an additional Sh2.2 million arising from the review of the waiver assessed by KRA last year,” the NSE financial report read.
Income from selling data to clients has grown three fold in the last five years to account for three per cent of the total revenues in 2015. The NSE realised Sh23 million last year up from Sh9 million in 2011.
The self-listed stock exchange made a total income of Sh808 million last year down from Sh822 million in 2014 and paid an annual tax of Sh75 million last year down from Sh121.7 million in 2014.
The board says it has a strong case to secure a waiver against the penalties and interest and could finally strike out contingency liability from their books.
This comes at a time the KRA is struggling to meet its targets, partly because NSE fought for scrapping the capital gains tax on share sales.
The Nairobi bourse fought off the controversial proposal to introduce a five per cent tax on the gains last year and instead secured a 0.3 per cent withholding tax on sales.
Chief executive Geoffrey Odundo said last year it also successfully lobbied the government to allow companies listing by introduction on the NSE to pay corporate tax at a lower rate of 25 per cent.