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Kenyan tycoon Baloobhai Patel is set to save thousands of dollars in taxes as he looks to transfer his 49.9-percent stake in Carbacid Investments to his private firm, Aksaya Investment Holdings.
The move, which is part of a succession0planning process, will significantly reduce the amount that Patel is charged in withholding taxes on his dividend earnings.
Presently, Patel, a leading Kenyan tycoon and serial investor, incurs a five-percent withholding tax on dividends paid by Carbacid, an investment holding company active in carbon dioxide gas production. This tax applies to all individual investors, but Kenyan companies are exempt if they own more than a 12.5-percent stake in the firm paying the dividend.
Carbacid paid a dividend of Ksh1.7 ($0.0138) per share for the year ending July 31, 2022, resulting in a net dividend of Ksh205.3 million ($1.66 million) for Patel, who holds a 49.9-percent stake, or 127.1 million shares, in the company. The withholding tax on these dividends amounted to Ksh10.8 million ($87,400), according to BusinessDaily.
Once the shares are transferred to Aksaya, they will be protected from the withholding tax as the conditions for the exemption will have been met. It is not yet clear which other assets owned by Patel will be transferred to Aksaya, as he has significant stakes in numerous listed firms.
The transfer of the stake in Carbacid marks the acceleration of a succession process that began in 2015, when Patel introduced his wife, Amarjeet Baloobhai Patel, as a co-owner of his multimillion-dollar positions in firms such as Sanlam Kenya, Bamburi Cement, Absa Bank Kenya, and Co-op Bank.
The Kenyan tycoon also holds stakes in Williamson Tea Kenya, Diamond Trust Bank Group, and Safaricom, the country’s largest telecom service provider.
Patel’s son, Rohan Baloobhai Patel, who runs the family’s property investment business and is the director of corporate development at Sanlam Kenya, is expected to play a leadership role in the restructuring process due to his active management of the family’s investment equity portfolio.
