Kenya Tax Appeals Tribunal Rules on Carbon Credits Income Tax Treatment
The Kenya Tax Appeals Tribunal ruled in favor of Wildlife Works Kenya, overturning a KES 6.89 billion tax assessment by the KRA, which was based on estimated sales rather than actual financial statements. While affirming that Wildlife Works Carbon LLC is liable for carbon credits income tax, the Tribunal determined that WWS Kenya is not liable as it was not designated as the tax representative. Additionally, the Tribunal supported WWS Kenya's pricing method and deemed withholding tax on presumed dividends as unjustified, emphasizing the necessity for tax assessments to be grounded in actual income.
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The Kenya Tax Appeals Tribunal allowed Wildlife Works Kenya's appeal against the KRA, dismissing a KES 6.89 billion tax assessment. The Tribunal found that the KRA incorrectly reallocated functions and relied on estimated sales instead of actual financial statements.
The Tribunal ruled that Wildlife Works Carbon LLC, the project developer of the Kasigau Corridor REDD+ project, is liable for the carbon credits income tax, while WWS Kenya, which provides operational support, is not liable as it was not appointed as WWC's tax representative. The Tribunal upheld WWS Kenya's use of the Transactional Net Margin Method for pricing, concluded that withholding tax on deemed dividends was unjustified, and emphasized that tax assessments should rely on actual income.
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