BY SAM ALFAN.
Kenya Revenue Authority (KRA) has appealed against a ruling in favour of Commercial Bank of Africa currently known as NCBA over Sh116 million arising from card interchange fees.
In a ruling last year, the tax appeals tribunal ruled in favour of the lender saying the fees are VAT exempt.
The taxman had assessed VAT on Visa interchange fees from January 2013 to December 2017 and demanded Sh116.5 million including principal tax of Sh16 million and interest of Sh20 million.
KRA says in the appeal that the Tribunal erred in law and fact in finding that Interchange fees received by CBA are not subject to VAT under the VAT Act, without any express provisions of the VAT Act exempting the same.
“The Tribunal erred in law and facts in finding that the services provided by CBA in a credit or debt card transaction are not taxable services as provided by section 5,6(1) and 6(4) of the VAT Act ,2013,” adds the taxman.
KRA says it strongly disagrees with the findings since the VAT Act, 2013 does not expressly state that Interchange fees are exempt financial services.
They told the court that the term “taxable supply” under the VAT Act has been defined as “supply of money, other than exempt service made in Kenya by a person in the course of furtherance of a business carried on by the person including a supply made in connection with the commencement or termination of a business.
According to KRA, the services offered by CBA of authorization clearing and settlement service are not services enumerated in the exemption under the VAT Act.
The taxman adds that Tax Tribunal failed to give any justification for adding the item to the exempt section of the Act and it out rightly lacks jurisdiction to amend the VAT Act .
KRA further submitted that in a taxing Act, one has to look merely at what is clearly said and there is no equity about tax.
There is no presumption as to tax and nothing is to be implied one can only look at the language used.
