KRA barred from demanding Sh234m tax from Equity

Equity Group's Chief Executive Officer James Mwangi addressing investors at Upper Hill, Nairobi. November 12, 2019. [Reuters]

The Court of Appeal in Nairobi has temporarily barred the Kenya Revenue Authority (KRA) from demanding Sh234 million Pay As You Earn (PAYE) from Equity Bank.

The taxman is after Equity over tax accrued from share buyout by its employees.

Justices Fatuma Sichale, Jamilla Mohammed and Mbogholi Msagha gave the bank reprieve after finding that the bank might suffer irreparable losses if it pays KRA before the case is concluded.

The tax agency had already slapped the bank with a demand notice after the latter lost its case before the commercial court in Nairobi.

“It is indeed not in dispute that the respondent has already issued a demand and threatened to commence enforcement measures against the applicant. No doubt, the amount involved is colossal,” the court observed.

The bank promised to provide a guarantee of the entire amount in the event the appeal fails.

“If the respondent is allowed to proceed with enforcement of the same, it is likely that the applicant will suffer unbearable hardship that may have the effect of stifling and crippling its operations,” the judges ruled.

KRA was initially demanding Sh1.7 billion from Equity but the lender objected. 

In the case, Equity’s legal manager Lydiah Ndirangu narrated how the taxman demanded the amount on September 19, 2017.

The amount included PAYE assessment for the year 2016 and tax on shares in an employee-share ownership plan.