Naivas Kenya Ltd Set to Pay KRA Sh1.8B Tax Arrears

Naivas Kenya Ltd, the owners, and operators of the Naivas supermarket chain, has lost its appeal against paying Sh1.8 billion in corporate taxes to the Kenya Revenue Authority (KRA) as a result of the sale of a 30% minority holding to African private equity group Amethis.

The company is now considering legal action to reverse the ruling which could have a negative impact on the retailer’s financial health.

Amethis Retail paid Sh5.2 billion for its minority stake in Mauritius-based Naivas International Limited.

On June 10, 2022, it filed an appeal with the Tax Appeals Tribunal against a KRA tax assessment that subjected the sale of Naivas International Limited to a 30% resident corporation tax.

The tribunal subsequently dismissed the appeal in a verdict made on August 4, 2023, agreeing with KRA’s assessment ruling totaling Sh1,794,000,000 in unpaid corporation taxes, according to a statement issued by KRA.

The review was prompted by Gakiwawa Family Investments (GFI) Limited’s 2020 sale of a 30% minority stake in Naivas International Limited to Amethis Retail for Sh5.2 billion.

“Naivas Kenya Ltd (NKLs) is liable to pay KRA Sh1,794,000,000 in corporation tax, after the Tax Appeals Tribunal (TAT) dismissed an appeal by the firm, against payment of corporation tax accrued from the sale of its 30 percent minority stake,”  Paul Mutuku, KRA Commissioner, Legal Services said.

The firm opposed the Commissioner’s assessment in its appeal, stating that they were not GFI’s tax representatives and that there was no nexus between themselves and GFI, and so would not be legally and practically able to carry out any obligations as GFI’s tax agent.

However, KRA revealed and the TAT determined that, while the GFI is incorporated in Mauritius, control and management of the holding company that owns Naivas Supermarkets is handled in Kenya by its Kenyan directors.

“… In the tribunal’s view… Gakiwawa Family Investments (GFI) and Naivas International Limited are managed and controlled in Kenya and thus this is a confirmation that they are tax residents in Kenya,” the tribunal ruled.

The KRA appointed Naivas Kenya Ltd as GFIL’s tax representative.

Gakiwawa Family Investments is a Mauritius-based company with a Global Business Licence issued by the Mauritius Financial Services Commission. GFIL initially maintained a 100% stake in Naivas International.

However, in the year 2020, Amethis Retail purchased 31.5 percent of Naivas International from GFIL for a price of Sh5.2 billion. Naivas International owns the entire stock of Naivas Kenya Ltd.