The Kenya Revenue Authority (KRA) has slapped the SBM Bank Kenya with a tax fine of Sh.737 million.
According to a report that appeared in a local newspaper, the multi-million tax fine emanates from an agency contract that SBM Bank Kenya and the KRA had back when the bank operated as the Fidelity Commercial Bank (FCB).
Fidelity was acquired by SBMÂ Holdings Limited (SBM Group) from Mauritius in 2017. SBM Group had made its intention to acquire FCB in 2016 through an advisory to the Central Bank of Kenya.
FCB had commenced operations as a non-bank financial institution in June 1992, and converted into a commercial bank in April 1996.
It was ranked 31 of 41 banks in terms of market share one year before it was acquired by SBM Group, with a share of 0.39 percent and fourteen branches around the country.
Apparently, KRA is now demanding the millions as fines on taxes collected by FCB on behalf if its customers in 2016.
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In a financial report, SBM Bank Kenya says that taxes adding up to Sh. 239.29 million were collected before the 2017 acquisition.
It notes that the full amount that had been collected was handed over to the KRA once the acquisition was completed. However, the taxman went on to raise a Sh. 737 million demand notice a month after the acquisition.
The lender, in its report, stated that it has received protection from the High Court even as it seeks to have the matter resolved via arbitration.
Incidentally, the amount of money that KRA is demanding from the bank is nearly five times the amount of net profit the bank recorded in the full financial year ended December 2023. In the financial year, the bank recorded a net profit of 150.78 million. The lender also has an accumulated loss of Sh. 1.35 billion in its books.
In 2018, months after its acquisition, the SBM Bank Kenya acquired the then troubled lender Chase Bank, and announced that its immediate priority was to restore Chase back to its peak state when it had a balance sheet of about $1.5 billion (at the time an approximate of Sh. 151.2 billion).