Naivas Vs KRA Battle: Taxman Seeks Over KSh 1.7b In Tax From Sale Of Retailer Stakes To Mauritius Firm

• Naivas Supermarket sold 31.5% stakes to Amethis Retail in 2020 in a deal that saw the family of the founder Peter Mukuha Kago receive KSh 5.2 billion
• Kenya Revenue Authority (KRA) raised concerns over the details of the deal concluded in Mauritius
• KRA demanded payment of KSh 1.79 billion from the sale of the retail store, which it accused the owners of restructuring to evade tax

Naivas Supermarket is on the spot following the sale of its 31.5% stakes to Amethis Retail in 2020.

Kenya Revenue Authority (KRA) accused the chain store of restructuring the deal in a foreign country to evade paying tax.

Naivas stake sale

The sale, which concluded in Mauritius, saw the family of the late Peter Mukuha Kago - under the wing Gakiwawa Family Investments - receive KSh 5.2 billion.

KRA directed Naivas to pay KSh 1.79 billion corporation tax, penalties and interests accrued from the deal after the Tax Appeal Tribunal dismissed the latter's application.

“In a layered and complicated scheme involving holding companies and subsidiaries, KRA unearthed a scheme to avoid payment of corporation tax in Kenya.

“The assessment emanated from the 2020 sale of 31.5% minority stake in Naivas International Limited (Mauritius) to Gakiwawa Family Investments,” said KRA in a statement.

Naivas filed a petition challenging the taxman's decision to tax the sale of the stakes to the international consortium.

Naivas battle KRA at Tax Appeal Tribunal

In its petition, the retailer argued that it is not the tax representative of Gakiwawa Family Investment.

However, the Tax Appeal Tribunal dismissed the plea, saying the company meets the specific requirements to represent the taxman."

"Based on the foregoing, thetribunal finds that Naivas Kenya Limited meets the specific requirements of appointment as the tax representative of GFI," read the Tribunal ruling in part.

Naivas family feud

The tribunal upheld KRA's decision, calling on each party to bear its own cost.

This followed a sibling rivalry that rocked the giant Kenyan retailer after the eldest son of Peter Mukuha Kago opposed the sale of an extra 11% stake worth US$ 41.7 million (KSh 5.92 billion) to foreign investors.

Newton Kagira Mukuha opposed the sale of the extra shares to Mauritian conglomerate IBL Group through Mambo Retail, as reported by Daily Nation.