Equity bank established an employee share ownership scheme in 2005 for purposes of encouraging their employees to acquire shares in the company. In a compliance audit carried out by KRA in 2016 on PAYE remittances, it was established that the bank had not subjected the ESOP benefit to PAYE deductions and a tax demand was made on the employer, equity bank.
The bank appealed to the Tax appeals tribunal and consequently lost the case further deciding to appeal to the high court. The court sitting in April 2021 upheld the tribunals decision allowing KRA to collect Sh. 234 Million. The presiding judge held “I find and hold that the tribunal did not err in concluding that Equity, as an employer, should deduct and remit to the commissioner tax on staff benefits under Section 37 of the ITA. It, therefore, made the correct finding that Equity Bank is liable for PAYE on the ESOP benefit to its employees,”
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