KENYA: Africa Oil Ordered to Pay $18.7M in Farm-out Taxes to Revenue Authority

High Court of Kenya has announced its decisions on the Company’s Tax Appeal Case Number 024 (consolidated with KRA’s Tax Appeal Case Number 051) with regard to the VAT assessment.

The High Court concluded that Africa Oil owes VAT in the amount of Kenyan Shillings 2,293,334,065 (approximately US$ 18.7 million). The KRA’s appeal with regard to the CIT decision was partly successful and the High Court concluded that the KRA was correct to disallow certain costs claimed by the Company.

In a statement to shareholders Africa Oil said the High Court’s decision on the KRA’s appeal with regards to CIT is not expected to have a material cash flow impact to the Company.

“Africa Oil is taking legal advice on the options available to it in view of this decision, including the option to appeal,” the company said.

On April 8, 2020, Africa Oil had announced that Kenya Tax Appeals Tribunal (TAT) had ruled on the Company’s appeal related to KRA’s CIT and VAT assessments, made in connection with farmout transactions completed during the period of 2012 to 2017. TAT ruled in favour of the Company with regards to the CIT assessments and in favour of KRA with regards to the VAT assessments. Subsequently, Africa Oil filed an appeal with the High Court of Kenya to challenge the VAT decision and KRA filed an appeal in relation to the CIT decision.