- Justice David Majanja said the facility granted to the employees by the school is a taxable benefit for which the employee is liable and the school also had an obligation to collect pay-as-you-earn (PAYE).
Elite learning institution, Brookhouse School, will pay Kenya Revenue Authority (KRA) Sh140 million arising from subsidised tuition fees granted to its staff, which the court ruled is a taxable benefit.
Justice David Majanja said the facility granted to the employees by the school is a taxable benefit for which the employee is liable and the school also had an obligation to collect pay-as-you-earn (PAYE).
“I find the commissioner’s position reasonable since staff members would pay the normal and ordinary school fees, which constitute the market rate, but for the employment-related benefit,” the judge said.
The court rejected the argument by Brookhouse that there was ambiguity in law on what value to be attached to non-cash benefits accorded to its employees.
The KRA did an audit of the school’s account between 2010 and 2014 and communicated its finding in 2017 claiming taxes amounting to Sh186.6 million.
The taxes included PAYE, corporate tax, and withholding tax.
The management of the school objected to the computation, especially on PAYE and non-cash benefits granted to its staff.
The school argued that in the absence of clear legislation on taxation of school fees benefits, it charges its teachers 15 per cent of the applicable school fees in accordance with best practice, which requires that the teachers’ pay the cost of delivery of the services.
In the alternative, the school argued that even if the taxman were to take the view that the school fees benefits are taxable, then it should not be subject to the full 85 per cent of the benefits tax but 10 per cent.
The commissioner reviewed the objection but ended up maintaining the Sh140 million for PAYE and Sh43 million withholding tax.