Companies

Barclays wins first round in Sh225 million tax battle with KRA

odunga

High Court judge George Odunga. FILE PHOTO | NMG

The Kenya Revenue Authority is demanding Sh225 million from Barclays Bank of Kenya #ticker:BBK over allegedly withholding tax arrears on royalties paid to card companies.

Barclays Bank in a suit filed in court seeking to stop the demand argues that it did not receive any assessment from taxman prior to receiving the demand and that no breakdown or details had been provided.

High Court judge George Odunga has temporarily suspended the tax notice pending a hearing of the dispute.

The lender further says the KRA has served notice on the Central Bank of Kenya requesting it to directly withhold Sh490 million from Barclays Bank’s cash held by the regulator.

The KRA in its response has, however, reduced the total outstanding amount from Sh490 million to Sh225 million, noting that the amount was erroneous since it did not factor in already recovered dues.

“The demand dated March 20, 2018, is unlawful as it was categorically held in Misc Application no.1223 of 2007… that no royalties are payable by the applicant to card companies and any demand for withholding tax is therefore completely unlawful,” says Barclays in its application.

The lender is referring to a previous dispute pitting it against the taxman demand over tax payable on royalties.

READ: KRA hits banks with Sh4.6 billion tax bill after bad loans audit

In that case, the court held that KRA decision to claim withholding tax on the basis of the interchange fee on credit cards lacks a legal footing as the taxman failed to identify the specific facts or transactions that form the basis of the application of the tax.  

Barclays now claims that the new dispute is similar in nature. The lender in the fresh suit says the move by the KRA seeking the Central Bank to release the colossal amount even before it responds to the demand amounts to unfair treatment and abuse of power.

The KRA in its response says that it carried out an audit for the period of 2007-2011 and communicated the assessment in July 2012, to which Barclays allegedly objected.

Barclays appealed to the Tax Tribunal in February 2013. The taxman says by consent they agreed on the tax assessment of Sh141 million covering 2007 to June 2009.