The coca cola company and KRA were embroiled in a dispute that lasted to nearly a decade over VAT on exported services. Coca Cola Central East and west Africa Ltd. had been offering marketing promotional services to Coca Cola Export company, a company based in the USA. KRA’s argument was that the promotional activities attracted audience in Kenya, same country where they were created hence it was a service consumed locally hence attracting VAT at standard rate of 16%. KRA went ahead to slap the company with Sh. 516 Million tax bill. Coca cola company on its side held that their client was based in the USA and hence they were exporting a service therefore this should have been zero rated for VAT services. The tax appeals tribunal (TAT) sitting in November 2013 ruled in favour of the revenue Authority.
Coca cola took the matter to the courts, and the high court sitting On 23 November 2020 overturned the Tax Appeals Tribunal ruling. The high court in its ruling was guided by destination principle under the OECD guidelines which states the jurisdiction of consumption is based on the customers’ location and the identity of the customer is determined by reference to business agreement for provision of those services.
So the location of the customer in USA, not the local audience based on the agreement.
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