The Kenya Revenue Authority is demanding Kshs. 3.4 Billion from Zuku’s parent company Wanachi Group. The tax demand originates from Wananchi subsidiaries Wananchi Group Holdings Limited, Wananchi Programming Limited, Wananchi Group Satellite Limited registered in Mauritius. The tax authority opines that as much as these companies are registered elsewhere, they are managed in Kenya which for all purposes makes them Kenyan.
The company had request the Kenya Revenue Authority to carry forward losses it had made for the purposes of tax computation according to Standard Newspaper. In a bid to attract foreign direct investment and create jobs, foreign investors have an incentive that allows them to roll over losses for up to 10 years. KRA on the other hand states that the company has been making payments to subsidiaries in Mauritius for services offered by employees in Kenya. KRA further argues that contracts between the companies registered in Mauritius and third parties were signed by the company’s staff in Kenya. As such, Wananchi managed to transfer billions in interest payment to shareholder loans all which should have been taxed.
These reports are following an audit performed for four years to 2013, with the tax demands made by KRA including a withholding tax of Kshs. 1.98 billion, value-added tax Kshs. 1.1 billion and income taxes Kshs. 267 million bringing the total bill to Kshs. 3.37 billion. The matter is currently in Court with Wananchi stating that all its operations are independent and as such the authority should audit them independently.