FEATURED STORY

KRA to Collect KShs 2 Billion Tax on Demurrage from Shipping Lines

Share
KRA Commissioner for Legal Services & Board Coordination Paul Matuku. He says that The court has allowed KRA to collect Withholding Taxes from shipping lines on container demurrage charges. www.businesstoday.co.ke
KRA Commissioner for Legal Services & Board Coordination Paul Matuku. He says that The court has allowed KRA to collect Withholding Taxes from shipping lines on container demurrage charges. [Photo/KRA]
Share

A Nairobi High Court has allowed Kenya Revenue Authority to collect Withholding Taxes from shipping lines on container demurrage charges.

The Withholding Tax from different shipping lines amounts to over KShs.2 billion.

Justice Francis Tuiyott of Milimani Court’s Commercial and Admiralty Division ruled in favour of KRA in the judgement of a consolidated tax appeal case filed by seven shipping lines operating in Kenya protesting taxation of income on demurrage charges.

Also see: You’ll No Longer Fill Excel Sheets Filing KRA’s Tax Returns

The shipping lines wanted the court to make a finding that demurrage charges are not subject to tax in Kenya. Demurrage fee is the charge levied by shipping lines on importers for holding the container beyond the free period.

In the appeal from the Tax Appeals Tribunal, the shipping lines argued that demurrage constitutes part of the amount received on account of the carriage of goods and is, therefore, part of the cost of carriage.

KRA, on the other hand, held the view that demurrage charges do not form part of freight levied by shipping lines as demurrage could only be accrued after the goods have been cleared through Customs and have entered the country.

In his determination, Justice Tuiyott held that freight comes to an end at the port of landing and any demurrage imposed on a container for late return after port clearance is a post importation charge. Demurrage charge is therefore different from freight.

Also see: Why You Need to Ditch Mobile Money Now

The High Court judge also held that demurrage charge is an Income Tax under Section 3 (1) and (92) of the Income Tax Act and that the shipping lines’ local agents have an obligation to withhold tax on the demurrage charge when remitting payments.

Justice Tuiyott, however, found in favour of the shipping lines with regard to Value Added Taxes (VAT) on processing fees.

He held that fees associated with loading, unloading and handling charges do not escape taxation because they have been included in the cost of freight and therefore taxed under paragraph 9 (2) of the East African Community Customs Management Act, 2014.

Read >> Why You Could Sue NTSA and Win

Written by
BT Reporter -

editor [at] businesstoday.co.ke

Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Follow Us

Related Articles
Affordable Housing Project
FEATURED STORY

Govt Puts Up For Sale 4,888 Affordable Housing Units: Here’s The Full List And How To Buy

The government has put up for sale 4,888 affordable housing units across...

Geraldine Sande, Channel Sales Leader for Schneider Electric East Africa
FEATURED STORY

How Working With ‘Glocal’ Original Equipment Manufacturers Can Empower East Africa’s Channel Partners For Success

Channel partners in East Africa, including resellers, distributors, system integrators and panel...

Treasury CS John Mbadi
FEATURED STORY

Understanding Tax Amendment Bills: How The New Laws Will Affect Kenyans

The government has announced several amendments to the existing tax laws to...

Prime Cabinet Secretary and Cabinet Secretary for Foreign & Diaspora Affairs
FEATURED STORY

Inside Kenya’s 60 Years of Diplomatic Journey

Kenya is set to commemorate 60 years of diplomacy this week starting...