Airtel Kenya is set to pay Kenya revenue Authority Sh. 531 million in back taxes relating to the acquisition of its operating licence in 2000 after losing a landmark case against the tax man. KRA successfully petitioned the High Court that the price paid by Kencell for its operating licence was a capital expenditure as it enabled the firm acquire an asset.
Kencell, then co-owned by billionaire Naushad Merali and French-owned Vivendi, had won a temporary reprieve when it protested against KRA’s tax demand before the arbitration committee.
The local committee delivered its decision in March 2005 and agreed with Kencell’s contention that the licence fee was not a capital cost but a revenue expenditure – a cost that is incurred during the ordinary course of business.
But KRA moved to court arguing that the licence fee paid by the company was for the acquisition of an intangible asset that the firm would utilise over time to provide mobile telephony, among other services.
Top among KRA’s pleas was that the fee was a one-off expense that was paid to the Government of Kenya, and could not be viewed as a cost that could be spread over time.
