I&M Bank has become the latest lender to win a tax dispute with the Kenya Revenue Authority following a long-standing confusion that has dogged imposition of excise duty on financial services in August 2012.
The lender’s parent firm I&M Group Plc has disclosed that the Tax Appeals Tribunal in March ruled in the subsidiary’s favour over a Sh231.22 million excise duty dispute for the period between January 2014 and September 2018.
KRA first hit I&M with a Sh283.51 million tax demand on January 17, 2019 — an assessment which was objected by the bank’s directors as “erroneous”.
The taxman lowered the demand to Sh231.22 million on April 15 that year following a review, but I&M challenged the decision before the tax tribunal.
“The matter was heard on February 16, 2021, and the tribunal ruled in favour of the bank on March 4, 2022,” I&M Group Plc said in its latest annual report.
Kenya became one of the first countries in Africa to enforce excise duty on earnings from financial services in August 2012 amid confusion on what constituted “other fees”.
The confusion persisted until 2015 when the Excise Duty Act 2015 excluded interest or return from loans and insurance premiums from “other fees” on which the lenders were to pay duty, but the ambiguity persisted.
But the confusion between the lenders and the taxman over the definition of interest or return persisted.