Brookhouse school has taken the Sh140 million tax row with the Kenya Revenue Authority (KRA) to the Court of Appeal. The school and the taxman are in a tax feud stemming from subsidized tuition fees granted to its staff.
The High Court had in April ruled is a taxable benefit. However, Brookhouse school returned to the court and convinced Justice Majanja to suspend his decision on the case, pending an appeal.
In allowing the school’s plea to suspend his earlier decision, David Majanja directed the Brookhouse to provide a bank guarantee of Sh15 million within 45 days, a failure to which the taxman was free to collect the amount.
Justice Majanja said that the respondent will suffer substantial loss should the court deny it stay. If execution proceeds, the respondent’s business which includes offering education to local and international students will likely shut down.
He added that the school has been having challenges due to the Covid-19 pandemic like many other businesses and any execution may affect its reputation as an international school.
In April, David Majanja approved KRA to collect the money, maintaining the facility granted to the staff is a taxable benefit and the school was also obliged to collect Pay-As-You-Earn.
The court rejected Brookhouse’s argument that the law was vague on what value to be attached to non-cash benefits granted to the staff.
The KRA audited the school’s account between 2010 and 2014 and communicated its report in 2017. KRA claimed taxes amounting to Sh186.6 million. These included Paye, withholding tax, and corporate tax.
The school management protested the computation on PAYE and non-cash benefits granted to its employees.
The Brookhouse held that in the absence of clear law on taxation of school fees benefits, it charges its teachers 15 percent of the applicable school fees. Alternatively, the school claimed that even if the KRA were on the view that the school fee benefits are taxable, then it should not be subject to the full 85 percent but 10 percent.
KRA reviewed the objection and later maintained the Sh43 million withholding tax and Sh140 million for PAYE.
The tax feud went to the tax appeal tribunal and the tribunal ruled in favour of the school, prompting the KRA to appeal the case.
The school explained it has three categories of students. Under the first category, students whose guardians pay standard fees.
The second category whose parents are members of staff and a lower fee, and then the third category on scholarships and bursary offered by the school. The third category pays a much lower fee than the first two categories.