The Kenya Revenue Authority (KRA) has won ‘big’ after a court ruling gave it the green light to collect Sh2 billion from seven shipping lines.
The High Court ruled earlier in the month that KRA can collect withholding tax from shippers on container demurrage charges – which are extra charges levied on cargo importers for delay in offloading goods after arrival at port.
Francis Tuiyott, a Judge at the Milimani Court’s Commercial and Admiralty Division ruled in favour of the taxman in a consolidated tax appeal case filed by shippers operating in Kenya who protested the extra charges.
CMA CGM, Gulf Badr Group, Oceanfreight, Sturrok Shipping, Maersk Kenya, WEC Lines and Inchcape Shipping Services are some the shippers that wanted the court to rule that the demmurage charges are not subject to tax in Kenya.
The companies argued that such charges constitutes part of the costs of shipping but KRA maintained that demurrage charges do not form part of freight levied by shipping lines because it could only be accrued after the goods had been cleared through Customs and let into the country.
Justice Tuiyott in his ruling also maintained that freight comes to an end at the port of landing and any demurrage imposed on containers for late return is a post-importation charge.
The decision upheld the earlier ruling by the tribunal court which also determined that demurrage charges paid by Kenyan firms “should be treated as income derived from Kenya” , which means that shippers are liable to withhold tax.