Centum Investments, Investbridge Capital, and SABIS have won a Sh3.1 billion tax dispute with the Kenya Revenue Authority (KRA) over the establishment of a premier international school in Kiambu county.
The taxman had rejected a Sh3.1 billion claim by ACE (Africa Crest Education Holdings), the business founded by the three firms in 2016 and based in Dubai, which they used to build an international school in exchange for incentives to build developments outside Nairobi, Mombasa, and Kisumu.
The KRA stated that the institution was not entitled to the 150 percent capital investment deduction that they had requested.
According to the taxman, the Centum school wished to take advantage of manufacturer tax breaks and should have asked for only a 50% tax deduction.
The tax appeals panel, on the other hand, determined that ACE was eligible for the 150% tax break since the Treasury had not made it clear that educational buildings were exempt from the incentive.
“Though the intention of Treasury as indicated in the budget speech that introduced that amendment was to restrict the investment deduction to the construction of factories, the same was not reflected in the wording of the section which merely states a building,” the tax appeals tribunal led by Eric Wafula said.
Centum and two companies revealed intentions to build many schools across Africa for between $20 million (Sh2.2 billion) and $35 million (Sh3.9 billion).
The organization chose Kenya as the location for its first school, where it established the SABIS® International School, which can house up to 2,000 pupils, but it plans to grow beyond East Africa to eventually cover the whole continent.
ACE stated that it built the schoolhouse in Kiambu for Sh2.06 billion after obtaining a secret judgement from KRA on its eligibility for the 150% tax exemption. The school said they had genuine expectations of receiving the tax break, which the KRA had refused.
The lawsuit comes as the government ramps up its efforts to eliminate tax breaks that cost the government up to Sh60.3 billion every year. The government has allowed corporations to avoid paying Sh360 billion in taxes over the previous six years.
The government now wants companies that invest in physical capital or machinery and deduct up to 150% for investment outside of Nairobi, Mombasa, and Kisumu, and 100% within the three municipalities, to receive 50% in the first year and a reducing balance over time, rather than receiving the benefits all at once.