Bidco wins decade-long Sh1.3bn tax duel

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Edible oil manufacturer Bidco has won a decade-long battle with the Kenya Revenue Authority (KRA) after the Tax Appeals Tribunal quashed tax demand of Sh1.3 billion.The Tribunal agreed with the Thika-based plant that the taxman did not properly apply provisions governing customs valuation on imported goods, when it assessed its taxes in 2008.Further, the three-member tribunal said marine insurance cover taken by Bidco had legal consequences and should have been considered in the adjustment of the price paid because it had an insurable interest in the goods."The Tribunal makes a finding that the customs value of the appellant's goods should have been made using the price actually paid for the goods and not the sum assured. The goods had been over-insured by 10 percent as agreed between the seller and the appellant as per industry practice," the Tribunal ruled.The KRA made a demand of Sh702 million from Bidco after conducting an audit on the firm's imports between January 2004 and July 2008.It said the audit revealed that values declared on credit and debit notes were 110 percent of the customs value declared by Bidco.The taxman concluded that the firm had under-declared the value of the imports of crude palm oil, palm stearin, crude palm olein, crude degummed soya bean oil and crude palm kernel oil from Singapore.Consequently, the KRA adjusted the customs values declared by Bidco upwards by 10 percent and value (cost) by 1.5 percent to cater for insurance premium.Bidco challenged the assessment, saying it took a marine policy covering the transport of goods from Indonesia and Singapore port to its premises at Thika. The cost of this insurance was used to adjust the invoice value to calculate the customs value of its imported goods.The firm added that the customs duty was administered in accordance with the East African Community Customs Management Act and there were no compelling grounds to demand payment.DUTY ASSESSMENTThe matter was first referred to a technical team, which after considering the case increased the amount to Sh780 million.Bidco then moved to court objecting the methodology and parameters used to assess import duty. The case was dismissed by the High Court and the KRA slapped Bidco with Sh1.3 billion arising from interest and penalty.The firm maintained that value for customs purposes on imported goods shall be the Cost Insurance and Freight (CIF).That Tribunal heard that the insurance cost Bidco paid on imported quantity was the amount it paid its insurers, Kenindia Assurance Company Ltd through M/s Universal Insurance Broker Ltd.This amount was fully added in all the import entries being the insurance on the goods imported and paid for."The upshot of the foregoing is that the decision of the respondent (KRA) to adjust the price actually paid on the basis of sum assured and adjusting the insurance actually paid was not in accordance with the provisions of Section 122 and Fourth Schedule to the East African Customs Management Act, 2004," the Tribunal chaired by Eric Wafula said.

Dec 20, 2020 (Nation Media Group via COMTEX) — COMTEX_376549316/2591/2020-12-20T16:11:25

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The MarketWatch News Department was not involved in the creation of this content.

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