Home » Kenyan tycoon James Mwangi’s Equity Group loses $8.34-million tax dispute against KRA

Kenyan tycoon James Mwangi’s Equity Group loses $8.34-million tax dispute against KRA

by Feyisayo Ajayi
James Mwangi

Equity Bank Kenya, the Kenyan banking unit of Equity Group Holdings, a leading financial services conglomerate led by Kenyan businessman James Mwangi, has suffered a significant setback in a tax dispute against the Kenya Revenue Authority (KRA).

The Kenyan High Court ruled against the bank, ordering it to pay Ksh1.16 billion ($8.34 million) to the tax authority. The dispute revolves around fees earned by Equity Bank between 2013 and 2016, which the KRA argues are subject to excise duty.

It agreed with the KRA’s position that various fees, including loan and credit evaluation reviews, temporary overdrafts, uncleared cheques, letters of credit, bank guarantees, invoices, and bill discounting, fall within the definition of interest under the Income Tax Act (ITA).

This contradicted a previous decision by the Tax Appeals Tribunal, which had ruled in favor of Equity Bank last year. The court criticized the tribunal’s interpretation of the ITA, stating that the fees charged by the bank were not exempt from excise duty. It also upheld the KRA’s assessment, including penalties and interest, totaling Ksh1.16 billion ($8.34 million).

Equity Bank objected to the assessment, arguing that the charges on loan and credit facilities should not be subject to excise duty. 

Equity Group in recent years has become a dominant force in East and Central Africa under the leadership of its managing director and CEO James Mwangi, who holds a 3.38-percent stake in the lender.

Mwangi’s strategic vision has expanded Equity Group’s operations into multiple countries, including Uganda, Tanzania, South Sudan, Rwanda, and the Democratic Republic of the Congo.

Despite this setback, Equity Group has reported positive financial results in the first quarter of 2023. Under Mwangi’s guidance, the group’s profit increased by 8 percent, reaching Ksh12.8 billion ($93.2 million), compared to Ksh11.9 billion ($86.6 million) in the same period last year.

This growth was primarily driven by a remarkable 57-percent surge in nonfunded income, which soared from Ksh11.5 billion ($83.7 million) to Ksh18 billion ($131 million).

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