KRA seeks Kshs. 531 Million from Airtel Kenya in defaulted taxes

Airtel Kenya has been in the news lately with regards to the renewal of its license.  Airtel Kenya’s license expired in  February 2015 yet to renew its license with the Communication Authority of Kenya. Airtel Kenya is currently using the license issued to Essar Telekom YU, whose operating license and subscribers it acquired. Airtel Kenya was first issued with the license in 2000 for 15 years, when it launched operations locally as Kencell.  The company has over the years changed ownership and subsequently re-branded as Celtel, then Zain and now Airtel Kenya. Communication Authority charges a renewal license fee of Kshs. 2.3 Billion, Kshs. 30.2 million for initial annual operating fees, outstanding frequency fees of Kshs. 24.9 million and a penalty payment of Kshs. 1.5 million from Airtel.

According to Business Daily, the Kenya Revenue Authority (KRA) is seeking Kshs. 531 million in taxes from Airtel for its first two years of operation in Kenya. The amount in taxes arose from the purchase of the operating license when it begun operations in Kenya as Kencell. KRA has since gone to court seeking to have the telco compelled to pay the debt.  According to KRA, Airtel should have recorded the license purchase as part of capital cost (charges a firm incurs when starting a business) but recorded it as revenue expenditure which is an operational cost deduct able from the company’s income tax thus making the company liable. The matter pitting Airtel and KRA begun in 2005 when the two appeared at the KRA tribunal where Airtel won the matter. Airtel has sought two weeks to file its arguments against the claim by KRA on the same.

Source: Business Daily