The High Court has barred the Kenya Revenue Authority (KRA) from demanding payment of 16% VAT on golf club membership subscriptions and entrance fees.
Justice Nixon Sifuna quashed the petition by the Kenya Revenue Authority (KRA), citing that the mentioned revenue pools are not taxable nor viable.KRA, through the Commissioner for Domestic Taxes, had appealed a decision by the Tax Appeals Tribunal Court in 2020 which restrained it from taxing golf clubs.The four respondent golf clubs located in Kiambu include Sigona Golf Club, Thika Golf Club, Ruiru Sports Club, and the Kiambu Club limited; and they argued that they are non-profit entities exempt from paying VAT.“While this court as the tax court will facilitate legitimate collection of tax for the economy, it has at the same time, the responsibility to guard against overzealousness, greed, unfairness, and unconscionableness in tax collection. While taxes are inevitable and a legitimate source of government revenue, we cannot tax everything and anything,” said the ruling by Justice Sifuna.
The taxman had argued that due to the exclusivity of the clubs’ membership, there was rational basis to charge taxes on the subscription fees. This, they said, confirmed that the clubs were purely in business and not philanthropic entities as they had counter-argued. Between 2015 and 2016, therefore, the authority demanded about KSh 40 million in taxes from the four clubs.
Justice Sifuna, however, disageed with the respondents’ claim that the membership fees qualified as ‘philanthropic provisions’. His only contention with KRA was that targeting every source of a business’ income was a case of ‘sheer caprice’ and ‘whim’ – a detriment to the operations of any business.
“I agree with the appellant (the tax authority) that this is tantamount to importing the provisions of the income tax act to VAT, as the determinant as to whether VAT is payable or not. The question at hand is just whether VAT is chargeable on the subject fees, and whether they are a taxable supply in terms of the VAT act,” the judge said in the ruling.
“With consequence that the joining fee and members subscription fee of golf clubs and sports clubs are exempt from VAT,” the ruling concluded.
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