The Kenya Revenue Authority (KRA) has given up on the Sh400 million tax it was seeking from SBM Bank Kenya in connection with the Chase Bank acquisition, ending nearly four years of a legal tussle with the Mauritian lender.
The taxman’s claim was related to a Sh9.6 billion five-year liquidity support loan that SBM tapped from the Central Bank of Kenya (CBK) during the purchase of certain assets and liabilities of the collapsed Chase Bank.
The KRA had in 2019 hit SBM with the demand relating to excise duty on the gain on the business combination that was recognised in the financial statements for the period ended December 31, 2018.
SBM discloses in the latest annual report that KRA, which had in 2021 been allowed by the Tax Tribunal to claim the amount, has now given up on the matter after the lender successfully appealed the matter in the High Court.
“KRA entered into an agreement with SBM Bank Kenya vacating the demand after getting satisfied with explanations supplied by the Bank. The case has subsequently been marked as closed in the High Court,” says SBM.
The taxman’s initial demand had been disputed by the bank and an appeal lodged at the Tax Tribunal through the services of a tax consultant.
However, SBM lost the appeal, with the tribunal, citing gaps in documentation provided by the bank.
SBM had resisted the push to give proof of payment for the acquisition, analysis, and valuations of the assets and liabilities taken over and supporting documents for the Sh9.6 billion CBK liquidity support.
SBM, however, fought off the claim by lodging an appeal against the decision of the Tax Tribunal in the High Court, dealing a blow to the KRA.
The High Court decision has seen KRA give up on the chase for the millions of shillings it was eying from SBM which in mid-August 2018 paid Mauritian rupees MUR162,158 (Sh490,167) as cash consideration to acquire Chase.
The lender booked a bargain purchase gain of MUR1.313 billion (Sh3.97 billion) in the deal. Chase Bank collapsed in 2016, the third lender under a year following the collapse of Imperial Bank and Dubai Bank.
The Mauritian lender entered the Kenyan market in May 2017 after it acquired Fidelity Commercial Bank for a Sh100 cash consideration.
Chase Bank is now under liquidation to pay the rest of the liabilities since most creditors did not get their money, including investors who had put in Sh4.8 billion in the Chase Bank bond that remains suspended.
