NAIROBI, Kenya — Kenya’s affluent learning institution Brookhouse, has lost a Ksh.140 million tax battle with the Kenya Revenue Authority (KRA).
The school has been obliged to pay the amount after a court ruled that subsidized tuition fees granted to its staff counted as a taxable benefit for which the employee is liable.
According to Justice David Majanja, the school had no obligation to collect Pay-as-you-Earn. (PAYE)
“I find the commissioner’s position reasonable since staff members would pay the normal and ordinary school fees, which constitute the market rate, but for the employment-related benefit.” He said.
Between 2010 and 2014, KRA conducted an audit on the school and communicated its findings in 2017 claiming taxes amounting to Ksh. 186.6 million.
KRA sought to collect taxes including withholding tax amounting to Ksh.43 million, Ksh.140 million PAYE and corporate tax.
Brookhouse challenged the claim and objected to the computation of PAYE and non-cash benefits granted to its staff.
It argued that in the absence of clear legislation on taxation of school fees benefits, the school charges its teachers 15% of the applicable school fees in accordance with best practice, which requires that the teachers’ pay the cost of delivery of the services.
The school further argued that even if the benefits are taxable, they should be charged 10% of the benefits tax and not 85%.
Majanja reviewed the objection, however, he maintained the Ksh.140 million PAYE and Ksh. 43 million withholding tax.