A major Kenyan commercial bank, ranked seventh by asset base, has been involved in disputes with the Kenya Revenue Authority regarding tax matters.
While the bank successfully challenged a tax claim of KES 450.27 million ($3.5 million) related to excise duty charges, it faced a setback in a separate KRA withholding tax claim of KES 88.4 million ($678,500).
Following a tax audit, the KRA found that the bank owed taxes for payments made to international card companies for services related to facilitating cashless transactions for merchants.
The KRA argued that these payments qualified as royalties subject to withholding tax since they involved using the card networks’ trademarks, logos, and management services to access payment systems.
In response, Stanbic Kenya contended that the payments were for professional services and did not involve intellectual property use as claimed by the KRA.
The Tax Appeals Tribunal determined that the payments constituted royalties due to the use of trademarks and logos for licensing and marketing, as well as accessing systems essential for transaction authorization and settlement.
As these payments were considered royalties, they were deemed taxable under the Income Tax Act in Kenya.