Centum Tax Obligation: Investment firm associated with the late billionaire Chris Kirubi, Centum Investments, has revised tax on its properties six times to Sh. 4 billion. This was an increase from the previously stated figure of Sh. 669.9 million.
In making this revision, Centum says that it has started using corporate income tax rate of 30 percent. This follows a decision by the Tax Appeals Tribunal which concluded that entities involved in the sale and development of land ought to be taxed at the higher rate as this is their normal business.
Previously, Centum had been assessing tax payable on revaluation gains in its real estate portfolio based on the capital gain tax (CGT) rate of five percent.
“For investment properties, where realization is expected to be through sale or development and sale of the property, management has established that deferred tax should be determined at the statutory income tax rate of 30 percent as the entity is deemed to be trading in land/properties rather than holding them for capital appreciation,” Centum’s chief finance officer Wambua Kimeu said in a report.
“A recent ruling at the Tax Appeals Tribunal in a matter involving a property developer with similar business model to Vipingo Development/Vipingo Estates also concluded that the applicable tax rate for entities involved in sales and development of land is the income tax rate of 30 percent, and not the CGT rate of 5 percent.”
How auctioneers raided Ngirici’s luxurious Runda home
Between 2019 and 2020, Centum had booked cumulative revaluation gains of Sh. 13.3 billion in its investment properties. This had its deferred tax assessed at Sh. 669.9 million at a rate of five per cent. In the new revision, the Sh. 13.3 billion gains have a deferred tax of Sh. 4 billion at a rate of 30 percent corporate income tax. This has now raised the firm’s tax obligation by Sh. 3.3 billion.
“The deferred tax has no cash flow implication, but it reduces the book value of shareholder funds and transfers the capital to a deferred tax account which is in effect an early recognition of tax. At the point of conclusion of a sale of any portion of the land, this account will be reduced by the actual tax payments,” said Kimeu