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Coca Cola and KRA embroiled in KES 500M tax battle

11 December 2013, 10:42

Nairobi - Coca Cola Kenya, the country's biggest soft beverage firm, is embroiled in a major legal tussle with the Kenya Revenue Authority (KRA) over more than KES 500 million tax on advertisements currently running on Kenyan media outlets.

A tribunal had earlier rejected Coca Cola Kenya’s bid to overturn KRA’s demand for KES 516 million as tax on the commercials which were produced by the parent company.

“There is an ultimate aim behind the marketing service that the people should be made aware about brand name of a product, and if they are aware of the brand name of the product associated with export (parent company) which is bottled by the local companies under license,” ruled the tribunal.

The beverage company however maintained that the adverts did not attract tax since it was commissioned by the Atlanta-based Coca-Cola Export Corporation.

KRA, on its part, states that the owners of the advert or the company that commissioned it were immaterial saying that the advert had helped to grow sales for the companies that dealt in products of the Coca-Cola Company.

KRA’s position was further reinforced by the tribunal which gave its verdict on November 26, a move which has led to Coca Cola appealing the decision of the tribunal. KRA stood by its position.

Coca-Cola Kenya reckons that it had not benefited directly from the profit made by the local bottlers and thus its aim was only to increase brand awareness and nothing more.  The beverage company is also locked in a separate lawsuit with the taxman.

“As earlier stated, what is material is the place of use or consumption of the service for if it is physically used or consumed in Kenya, it is subject to Kenya VAT,” said the tax authority.

– CAJ News



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