Kenya vs Avic International: CASE SUMMARY
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Kenya vs Avic International: CASE SUMMARY
Case Information
- Court: Tax Appeals Tribunal (Kenya)
- Case No: TAT No. E786 of 2023
- Applicant: AVIC International Beijing (EA) Limited
- Defendant: Commissioner of Domestic Taxes
- Judgment Date: 22 November 2024
- Download the FULL JUDGMENT
Judgment Summary
The Tax Appeals Tribunal in Kenya ruled on the case involving AVIC International Beijing (EA) Limited (Appellant) and the Commissioner of Domestic Taxes (Respondent) concerning disputed tax assessments covering Corporation Tax, PAYE, and Withholding Tax (WHT) for the years 2016 to 2023. The Respondent issued an audit notice on 30 July 2021 and finalized its assessments on 29 June 2023, leading to additional tax liabilities of Kshs. 530,528,802, later reduced to Kshs. 514,154,336 after objections.
Key disputes included the appropriateness of the Transactional Net Margin Method (TNMM) as the most appropriate method (MAM) for transfer pricing adjustments, the accuracy of income assessments based on VAT discrepancies, and the double taxation claims related to PAYE and WHT on expatriates and seconded personnel. AVIC argued that the Resale Price Method (RPM) was more suitable given the nature of its transactions and that TNMM overcomplicated the analysis. Further, the Appellant contended that certain assessments extended beyond the statutory five-year limit.
The Tribunal upheld the use of TNMM as the most reliable method under the OECD Guidelines, noting deficiencies in AVIC’s benchmarking and FAR analysis. However, it recognized procedural errors in assessing income discrepancies and PAYE liabilities. The Tribunal dismissed claims of double taxation and ruled on the validity of deemed dividend taxes based on adjustments.
The judgment highlighted the importance of comprehensive compliance with transfer pricing documentation and functional analysis to mitigate disputes, emphasizing adherence to procedural guidelines.
