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Naivas Kenya Ltd, the owners and operators of the Naivas chain of supermarkets has lost its appeal against payment of corporate tax worth Sh1.8 billion to Kenya Revenue Authority (KRA) from sale of a 30 per cent minority stake to African private equity firm Amethis.

The company now faces the prospect of seeking legal recourse in order to reverse a decision with a potential of impacting the retailer’s financial health. It disposed of its minority stake in the Mauritius-based Naivas International Limited to Amethis Retail for Sh5.2 billion.

It had filed an appeal at the Tax Appeals Tribunal on June 10, 2022 against a tax assessment conducted by KRA, subjecting the sale of Naivas International Limited to a resident corporation tax of 30 per cent.

The tribunal has since dismissed the appeal in a judgement delivered on August 4, 2023, agreeing with KRA’s assessment decision amounting to Sh1,794,000,000 of unpaid corporation tax, KRA said in a statement.

Family investments

According to KRA, the assessment emanated from the 2020 sale of a 30 per cent minority stake in Naivas International Limited to Amethis Retail for Sh5.2 billion by Gakiwawa Family Investments (GFI) Limited.

“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 per cent minority stake,”  Paul Mutuku, KRA Commissioner, Legal Services said. In the appeal filed by NKL, the firm objected to the Commissioner’s assessment and stated that they were not the tax representatives of GFI and there was no nexus between themselves and GFI and thus would not legally and practically be able to carry out any obligations as GFI’s tax representative.

It was, however, revealed by KRA and ruled by the TAT that although the GFI is incorporated in Mauritius, the control and management of the holding company that owns Naivas Supermarkets is exercised by its directors who are Kenyan, in Kenya.   “… 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.

Tax representative

Naivas Kenya Ltd was appointed by the KRA as the tax representative of GFIL.

Gakiwawa Family Investments is incorporated in Mauritius and holds a Global Business Licence issued by the Financial Services Commission of Mauritius. GFIL initially held 100 per cent shareholding in Naivas International.

However, Amethis retail acquired 31.5 per cent in the year 2020, Amethis Retail acquired 31.5 per cent stake in Naivas International from GFIL at a sale price of Sh5.2 billion. Naivas International holds 100 per cent shareholding in Naivas Kenya Ltd.