Introduction
This alert brings to your attention a recent Tax Appeals Tribunal decision in the case of Prime Capital and Credit Limited v Commissioner for Legal Services and Board Coordination (KRA) (Tribunal Appeal E101 of 2023) [2024] (24 May 2024) (Judgment).
The Tax Appeal Tribunal partially upheld Kenya Revenue Authority’s (KRA’s) objection decision by setting aside the confirmed assessment on apportionment of general expenses incurred by the business in earning exempt income and donations which the KRA had apportioned in a direct proportion to the exempt income earned. In addition, the Tax Appeals Tribunal upheld the assessment related to the unrealised foreign exchange loss and overstated unrealised foreign exchange gains.
Background
The Appellant is a limited liability company incorporated in Kenya under the Companies Act and engaged in lending money and investing in shares listed on the Nairobi Securities Exchange and private related companies, government and foreign bonds.
Following a review of its tax affairs for the period January 2017 to December 2021, the KRA disallowed portions of expenses claimed by the Appellant in relation to exempt income, adjusted for foreign exchange gains and losses and recomputed the company’s annual tax computations, resulting in a KES 274,970,145 reduction of the company’s tax losses.
After the Appellant lodged an objection, the KRA partially amended the tax liability by allowing some expenses and confirmed a tax loss reduction of KES 271,940,415.
Dissatisfied with this outcome, the Appellant filed an appeal before the Tax Appeals Tribunal.
