- The Kenya Revenue Authority (KRA) has secured a major victory after the Tax Appeals Tribunal upheld a KSh 1.76 billion tax demand against pineapple giant Del Monte Kenya Limited
- The tribunal dismissed the company’s appeal, finding it failed to prove that its international transactions with a Swiss affiliate were conducted at market value, a practice known as “transfer pricing”
- The tribunal agreeing with KRA that the local subsidiary was not adequately compensated for its complex role and significant risks
Elijah Ntongai is an experienced editor at TUKO.co.ke, with more than four years in financial, business, and technology research and reporting. His work provides valuable insights into Kenyan, African, and global trends.
The Tax Appeals Tribunal has validated the Kenya Revenue Authority’s assessment of KSh 1.76 billion in principal tax, penalties, and interest against Del Monte Kenya Limited.
Source: UGC
The tribunal found that the company’s complex international transactions with its Swiss-based affiliate resulted in an understatement of taxable profits in Kenya, a scheme the taxman successfully challenged.
The judgment by a five-member bench led by Chairperson Christine A. Muga rejected the company’s entire appeal, upholding KRA’s objection decision issued in September 2024 in the judgement delivered on January 16, 2026.
Search option is now available at TUKO! Feel free to search the content on topics/people you enjoy reading about in the top right corner 😉
What was the core of the tax dispute with Del Monte Kenya?
The dispute arose from a KRA audit of Del Monte Kenya’s “transfer pricing” practices for the year 2018. Transfer pricing refers to the rules for pricing transactions between companies under common ownership across borders.
Del Monte Kenya, the grower and processor of pineapples in Thika, sells its products to its Swiss-based sister company, Del Monte International GmbH (DMI GmbH), which then markets and distributes them in Europe.
KRA alleged that the prices charged to the Swiss affiliate were not at “arm’s length”, meaning they did not reflect what independent companies would charge, thereby shifting profits out of Kenya to a lower-tax jurisdiction.
The company had applied a 4.83% mark-up on its costs when selling to DMI GmbH, and argued that this was an appropriate return for its role as a “grower and processor.”
Why did the tribunal side with KRA over the company’s structure?
Del Monte Kenya argued that the lender of a multi-billion shilling intercompany loan, Del Monte Fund B.V., was owned by the ultimate Cayman Islands parent.
However, KRA presented evidence, including registry records, showing the lending entity was, in fact, wholly owned by the Swiss affiliate, DMI GmbH. The tribunal found the company failed to provide official documentary evidence to counter KRA’s claim.
This finding influenced the tribunal’s view of the entire group’s financial arrangements.
How did the tribunal analyse the profit allocation between Kenya and Switzerland?
The tribunal conducted a detailed “Functional, Assets, and Risk” (FAR) analysis, the bedrock of transfer pricing.
It rejected Del Monte Kenya’s claim that key functions like quality control, inventory management, shipping logistics, sales, and marketing were primarily performed by the Swiss entity.
Evidence, including emails and purchase orders, showed DMI GmbH had a supportive or agency role, but core operational functions, risks (like crop failure and market risk), and assets (like plantations and processing plants) resided with the Kenyan entity.
“The Appellant failed to adduce sufficient evidence to prove that the FAR analysis of the Respondent was incorrect,” the tribunal stated, noting that emails merely showed communication, not proof of functional control by Switzerland.
Del Monte Kenya used the Transactional Net Margin Method (TNMM) with a Full Cost Mark-Up (FCMU) to justify its 4.83% return. The tribunal ruled this method was “inappropriate.”
Having found the Kenyan entity was the more complex and risk-bearing party, the tribunal held that the Swiss distributor (DMI GmbH) should have been the “tested party” for pricing analysis.
Crucially, the tribunal classified the services provided by the Swiss entity as “low value-adding intra-group services.” Under OECD guidelines, such services are benchmarked at a standard 5% mark-up, and no complex benchmarking study is required.
The tribunal thus agreed with KRA that Del Monte Kenya’s method under-rewarded the value created in Kenya.
What other tax claims by the company were dismissed?
The tribunal upheld KRA’s disallowance of several expenses claimed by the company. It found that the firm failed to provide original source documents to support recharged costs running into millions of shillings for software, administration, and procurement from related entities.
The tribunal also disallowed a KSh 415 million interest expense on an intercompany loan from Del Monte Fund B.V.
It agreed with KRA that the loan lacked substance and that the company failed to justify the interest rate using a comparable third-party bank quotation.
The tribunal dismissed Del Monte Kenya’s appeal in full, upheld the KSh 1.76 billion tax assessment for 2018, and ordered each party to bear its own costs.
Salesman loses KSh 1.3 million commission claim
In other news, the Employment Court dismissed a former salesman’s claim for KSh 1.35 million in unpaid commissions, ruling he failed to prove how the amount was calculated.
Erastus Ndungu Kariuki had sued Redachem East Africa Limited, arguing past payments created an expectation.
Justice Stella Rutto found he provided no evidence of company profitability, a prerequisite for his claim, or a breakdown of the sum, calling the suit speculative and lacking “strict proof.”
Source: TUKO.co.ke
