Botswana-based retailer Choppies Enterprises Limited has been ordered by the Nairobi High Court to provide security for taxes amounting to 173 million shillings payable to the Kenya Revenue Authority before accessing their frozen accounts.
This follows a ruling reached by Justice David Majanja who upheld the decision by KRA to freeze accounts of the supermarket chain over the tax arrears.
Choppies Enterprises Limited moved to court on 22nd April 2020, in a bid to stop the tax man from freezing its accounts at a time when the retailer has been struggling to improve its cash flow in Kenya’s competitive retail market.
The retailer had filed an application in Court under Certificate of Urgency seeking orders to unfreeze its accounts pending completion of an ongoing tax dispute.
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Justice David Majanja held the ruling in favour of KRA adding that authority’s position on the case, which the court found was successfully argued, was informed by the fact that Choppies had already sold its branches, assets and stocks to Tusker Mattresses Supermarkets, Chandarana Supermarkets Limited, Quickmart Supermarkets Limited and Appmatt Limited without informing the Authority in spite of the ongoing tax dispute amounting to 173.39 shillings.
Choppies was faulted for not disclosing their financial position; in that they did not disclose how much was held in their accounts and what would be realized from sale of their assets.
The Court thereby found that Choppies should provide security for taxes payable to KRA in view of the fact that they are closing shop in the country. Choppies and KRA now have fourteen (14) days to explore an amicable settlement of the tax dispute.
At the same time, the KRA has also directed business owners trading on digital platforms to charge Value Added Tax on their transactions and remit the taxes to KRA. Commissioner for Domestic Taxes Elizabeth Meyo said in a statement that KRA had noted with concern that some digital business owners had failed to charge VAT as required by law.
In a statement Meyo says, “All non-compliant traders are hereby advised to comply to avoid penalties and interests on outstanding taxes failure to which appropriate action will be taken in accordance to the law. Where fraud will be detected, appropriate criminal proceedings shall be brought against the offenders.”
According to Meyo, the Finance Act 2019 clarifies that income from digital transactions are VAT payable.