The High Court has dismissed an application by Nairobi Bottlers seeking a tax refund of Sh58.8 million, claiming it was erroneously paid to Coca-Cola Sabco (Pty) Limited on technical and computer charges.
Justice Benjamin Njoroge ruled that the Tax Appeals Tribunal did not err in holding that the bottling firm cannot enjoy the benefits under Kenya – South Africa Double Tax Treaty (DTA), since Coca Cola Sabco (Pty) Limited, did not meet the ownership test, set out in the Income Tax Act, to enjoy the Treaty benefits.
The court was informed that 67.5 percent of the shareholding of Coca-Cola Sabco is owned by Coca-Cola Company USA, while the Gutshe Family Investment owns 33.5 percent shareholding.
“In light of the above, the court agrees with the Tribunal’s holding that if the party to benefit from the tax exception has 50 percent or more of its underlying ownership held by a non-resident, then Section 41(5) of Income Tax Act negates the relief that such a party would otherwise be entitled under the provisions of the DTA,” said the judge.
Nairobi Bottlers said it applied for a tax refund in May 2019, for income tax paid in error in December 2018 on technical fees and computer charges. The application was rejected by the Commissioner of Domestic Taxes in October 2021.
The bottling firm filed an appeal before the tribunal arguing that it was justified in seeking a refund of Sh41.7 million and Sh17.1 million for withholding tax, erroneously paid on technical fees and computer charges to Coca-Cola Sabco (Pty) Limited.
The tribunal dismissed the appeal. The firm moved to High Court arguing that the tribunal was wrong in disregarding the fact that Coca-Cola Sabco is a company resident in South Africa.
KRA, in opposing the case, argued the taxes were correctly withheld and that the tribunal was correct in holding that the Coca-Cola Sabco fails the ownership test.
