KRA have a right to come after credit card payouts

KRA has the right to come after the credit card payouts according to a ruling by judges. The Court of Appeal has declared that trademarks and interchange fees on visa cards are to be taxed.

The judges at the Court of Appeal rule that an interchange fee paid by a bank to another should therefore have a withholding tax. They took note that this is a management and a professional service.

They as well rule that, “Accordingly, we do not perceive any ambiguity in the statute that would require legislative intervention nor are we satisfied from the totality of the evidence on record that the respondent (Absa) did not understand the basis of the appellant’s demand for withholding tax as royalty for its use of the credit cards.”

Similarly, KRA argues that when a cardholder presents their card to a merchant or supermarket to make purchase, the card is swiped. Henceforth, it is swiped through a point-of-sale machine that is supplied by the bank. This is where the KRA requires the tax, when the card is swiped.

It also states that the fees that Absa pays as the receiver to the card issuer includes a facilitation fee. The fee acts as a medium of communication between the merchants, receivers and issuers.

Absa notes that these are its responsibilities to which it does not have to pay for. It declares to the court that the tax law is nothing but vague. Likewise, Absa adds that it has to pay transaction fees for one to access and use networks operated by the card organizations.

Kenya Revenue Authority has carried out an audit between 2007 and 2011. They wrote to Barclays in 2012 and 2013 requesting tax for the payments. They add that the payments to the card organizations are managerial fees. According to their statement, the fees Barclays pay to other banks for Visa services are liable for levies, thus payment card organizations ought to fall in the same class.

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