News

Court allows KRA to collect tax on demurrage

Wednesday, February 26th, 2020 06:26 | By
Court Hammer PHOTO/Courtesy

The High Court has allowed Kenya Revenue Authority (KRA) to collect Sh2 billion withholding taxes from shipping lines on container demurrage charges.

This followed a consolidated tax appeal case filed in Milimani Court’s Commercial and Admiralty Division by seven shipping lines operating in Kenya contesting taxation of income on demurrage charges

In his judgement, Justice Francis Tuiyott held that freight comes to an end at the port of landing and any demurrage imposed on container for late return after port clearance is a post importation charge. Demurrage charge is therefore, different from freight.

“The court upholds the decision of the tribunal that demurrage relating to the delay of containers is not part of freight,”’ ruled the Judge. 

Shipping lines wanted the court to declare that demurrage will not subject to tax. Demurrage fee is a charge levied by shipping lines on importers for holding containers beyond the free period.

Carriage cost

In the appeal from the tax tribunal they argued that demurrage constitutes part of the amount received on account of the carriage and is therefore, part of the cost of carriage. KRA on the other hand said demurrage charges do not form part of freight levied by shipping lines as it can only be accrued after the goods have been cleared through customs. 

Justice Tuiyott held that freight comes to an end at the port of landing and any demurrage imposed on container for late return is a post importation charge. Demurrage charge is therefore, different from freight.

He also held that demurrage charges should be treated as income tax  and the shipping lines’ local agents have an obligation to withhold tax on the demurrage charge when remitting payments.

More on News


ADVERTISEMENT

RECOMMENDED STORIES News


ADVERTISEMENT