KRA discloses Sh15.9bn tax on Safaricom deal

KRA commissioner general John Njiraini. FILE PHOTO | NMG 

By MUGAMBI MUTEGI

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Summary

• Vodafone on August 7 transferred its 35 per cent stake in Safaricom, held in the investment vehicle Vodafone Kenya Limited, to Vodacom in exchange for 233.5 million new shares in the Johannesburg-based firm.
• Vodafone, in its regulatory filings for the six months, indicated that it paid Sh13 billion (€110 million) in capital gains tax and stamp duty following the share swap but did not specify to whom the payment was made.
• The KRA has now clarified that this transaction was subject to capital gains tax since amendments to the law last year only exempted shares traded on the Nairobi Securities Exchange (NSE) from paying the levy.

The Kenya Revenue Authority (KRA) has revealed that it received about Sh16 billion from the recently-concluded share transfer involving Safaricom’s

parent company Vodafone and its African subsidiary Vodacom.

Vodafone on August 7 transferred its 35 per cent stake in Safaricom, held in the investment vehicle Vodafone Kenya Limited, to Vodacom in exchange for 233.5 million new shares in the Johannesburg-based firm.

The multinational booked a huge capital gain on the transaction, part of which it realised on September 7 by selling 90 million of the new Vodacom shares for €962 million (Sh115 billion) on the Johannesburg Stock Exchange.

Vodafone, in its regulatory filings for the six months, indicated that it paid Sh13 billion (€110 million) in capital gains tax and stamp duty following the share swap but did not specify to whom the payment was made.

The Kenyan taxman has now clarified that this transaction was subject to capital gains tax since amendments to the law last year only exempted shares traded on the Nairobi Securities Exchange (NSE) from paying the levy.

READ: Safaricom shares deal earns UK Sh13bn tax

Vodafone did not respond to our request for clarification on whether it also paid tax on the transaction to the UK government.

“The shares transfer from Vodafone International Holdings BV to Vodacom Group Limited was done through direct transfer and was therefore subject to capital gains tax,” the KRA said in a statement to the Business Daily.

“The parties involved in the transaction declared and paid taxes and duties to the KRA totalling Sh15,967,782,690.”

Vodacom Group paid stamp duties amounting to Sh2.7 billion while Vodafone International Holdings BV, a Vodafone subsidiary registered in Netherlands, paid Sh13.3 billion in capital gains tax, according to the KRA.

READ: Vodafone sells Sh117bn Safaricom shares on JSE

READ: Safaricom stake buy boosts Vodacom net profit by 7 pc

Kenya re-introduced the capital gains tax effective January 2016, with the rate set at five per cent.

Its application on stock market transactions was, however, abolished later in the year after challenges of its collection and fears of driving away investors marred its implementation.

KRA says the Vodafone/Vodacom deal was not exempt from the tax as it was done outside the Nairobi Securities Exchange.

“The shares transferred…did not form part of shares listed on the NSE. The shares transfer…was done through direct transfer and was therefore subject to capital gains tax. The shares are still held in Vodafone Kenya Ltd,” the KRA added.