The tax appeals tribunal has ruled the company was right to pay import taxes on the three-wheelers imported from Piaggio Ape as motorcycles.
The taxman wanted the tuk-tuk’s classified as transport vehicles while C&G argued that they are more akin to motorcycles.
The tribunal said that even KRA expert witness Wafula Stephen had testified that under the current law tuk-tuks could potentially be classified as both a vehicle and motorcycle.
Car & General (C&G) #ticker:CGEN have fought off a Sh1.1 billion tax demand from the Kenya Revenue Authority (KRA) over the classification of their three-wheeler or tuk-tuk as transport vehicles.
The tax appeals tribunal has ruled the company was right to pay import taxes on the three-wheelers imported from Piaggio Ape as motorcycles.
The taxman wanted the tuk-tuk’s classified as transport vehicles while C&G argued that they are more akin to motorcycles.
C&G said National Transport and Safety Authority (NTSA) statistics showed 5,502 units of tuk-tuks were imported in 2020 half of which were from China and were classified as motorcycles and it would be unfair for KRA to charge their units higher taxes as transport vehicles.
The tribunal said that even KRA expert witness Wafula Stephen had testified that under the current law tuk-tuks could potentially be classified as both a vehicle and motorcycle but that the three-wheelers lacked additional features that would put them under the category of vehicles.
“The tribunal pursuant to GRI 3(c) and GRI 4 found that Piaggio Ape three-wheeler vehicles imported by Car & General did not meet the design characteristic of vehicles of heading 87 03 and 87 04 and were most appropriately classified under HS 87 11,” the tax appeals tribunal led by Eric Wafula said.
KRA had made the Sh1.1 billion demand from C&G, with the parties conflicting over the legal basis on which the taxman computed the sum.
The tax demand was equivalent to 134.5 percent of the diversified trading company’s net profit of Sh887.2 million in the year ended September 2021.
The Nairobi Securities Exchange-listed firm in its latest annual report objected to the tax assessment at the tribunal arguing that a tuk-tuk does not have a motor car steering system and is not mounted on a T-shaped chassis whose two rear wheels are independently driven by separate battery-powered electric motors.
Tuk-tuks, the company said do not have permanent seats with safety equipment or doors when imported and need to be fabricated and installed locally.
They have no rear windows nor comfort features and interior finish like floor carpeting, ventilation, interior lighting or ashtrays.
The case highlights a trend where companies are increasingly fearful of the taxman’s unpredictable demands years after goods have been sold.
The taxman has stepped up tax assessments on companies, with some of the reviews resulting in hefty tax demands running into hundreds of millions of shillings or even billions.
C&G revealed the tax demand after posting strong earnings growth in the year ended September 2021, helped by higher revenues.
