SBM Bank Kenya Slapped with Rs 258.6M Fine

This penalty is related to an agency agreement that SBM Bank Kenya and KRA had when the bank operated under the name Fidelity Commercial Bank (FCB).

The Kenya Revenue Authority (KRA) has imposed a tax penalty of 737 million shillings, equivalent to Rs 258.6 million, on SBM Bank Kenya.

Fidelity was acquired by SBM Holdings Limited (SBM Group) of Mauritius in 2017.

SBM Group had expressed its intention to acquire FCB in 2016 through a notice to the Central Bank of Kenya. FCB started as a non-bank financial institution in June 1992 and converted to a commercial bank in April 1996.

It was ranked 31st out of 41 banks in terms of market share a year before its acquisition by SBM Group, with a market share of 0.39% and 14 branches across the country.

KRA is now demanding these fines for taxes collected by FCB on behalf of its clients in 2016.

In a financial report, SBM Bank Kenya stated that taxes amounting to 239.29 million shillings, approximately Rs 88 million, had been collected before the 2017 acquisition.

The full amount collected was handed over to KRA once the acquisition was finalized.

However, the Kenyan tax authorities reportedly demanded the Rs 258.6 million one month after the acquisition.

SBM Group claimed to have obtained protection from the Kenyan High Court, although the group was seeking to resolve the dispute through arbitration.

The amount demanded by KRA is nearly five times higher than the net profit the bank recorded for the full year ending in December 2023.

Therefore, SBM Group stated that its management, considering the underlying facts of the claim, is confident that it will not be found liable in the legal dispute.

Therefore, no provision for these Rs 268.6 million claims was made in the financial statements for the year ending in December 2023.

“The possibility and extent to which an outflow of funds will be required to settle the matter will depend on the outcome of the ongoing litigation and the arbitrator’s decision in case the court orders the parties to resolve the dispute through arbitration,” the bank group said. This is what the press in Kenya is reporting.

Source: Le Mauricien