UGANDA, Kampala | Real Muloodi News | Nairobi-based Bamburi Cement, a subsidiary of Hima Cement in Uganda, listed on the Nairobi Securities Exchange, is currently grappling with significant tax claims totalling Sh1.2 billion from authorities in both Kenya and Uganda.
The claims far exceed the company’s net profit of Sh181 million reported for the year ending December. Bamburi has taken measures to address these potential liabilities but faces challenges in resolving the issues.
According to Bamburi’s latest annual report, Kenya’s Treasury Cabinet Secretary rejected the company’s request for a waiver of penalties and interest amounting to Sh288 million.
The penalties stem from a tax assessment covering the period from 2007 to 2011. Bamburi intends to continue engaging with the Cabinet Secretary for National Treasury and Planning to review the decision.
Ugandan Tax Claim
Bamburi Cement’s subsidiary, Hima Cement Limited, operates in Uganda and is subject to a tax demand totalling Sh956 million.
The Uganda Revenue Authority (URA) initiated a review of Hima Cement’s transfer pricing compliance for the financial years 2014 to 2018.
In December 2022, the URA raised a corporation tax assessment of Sh594 million along with Sh362 million in interest.
Bamburi objected to the assessments and submitted a detailed response to the objections team of URA. The URA is expected to review the objection application and communicate a decision within 90 days from the date of objection.
Bamburi Cement reached a settlement with the Kenya Revenue Authority in 2018 concerning a tax assessment for the period from 2007 to 2011.
The company paid a principal tax of Sh332 million related to corporate tax as part of the settlement. Additionally, Bamburi paid Sh40.6 million for the years 2012 to 2014, covering corporate tax, withholding tax, and value-added tax.
The tax claims have had a significant impact on Bamburi’s financial performance. The company’s net income plummeted to Sh181 million in the last year from Sh1.3 billion in 2021. This decline can be attributed to lower sales, increased costs, and a substantial tax bill.
Bamburi paid Sh454 million in taxes during the review period when its pre-tax earnings amounted to Sh635 million, resulting in an effective tax rate of 71.4 per cent.
The standard corporate income tax rate for resident firms in Kenya is 30 per cent, closer to the Sh792 million in taxes Bamburi paid in 2021 on pre-tax earnings of Sh2.17 billion.
Additionally, the company’s sales dropped from Sh41.3 billion to Sh38.9 billion, while costs such as marketing and production remained high.
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