KRA wins a Sh 2.2 billion tax battle with Africa Oil Kenya BV

 

Monday, December 12, 2022 – The Kenya Revenue Authority (KRA) has won a court battle with Africa Oil Kenya BV.

KRA had taken the oil firm to court accusing it of evading a Sh 2.2 billion tax. 

In a judgment delivered on Monday, the High Court dismissed an appeal by Africa Oil Kenya challenging the Tax Appeals Tribunal’s decision which endorsed KRA’s demand.

The court agreed with the tribunal’s decision which was also KRA’s position that the farm-out agreement is structured in a way that Africa Oil Kenya retains an overriding reversion ally interest in the farmed-out area of pay-out.

A farm-out agreement is commonly used in the oil, natural gas and mineral industries, it’s an agreement signed by a property owner known as a farm-out when leasing their resource-producing property to another person.

The court further noted that once the farm-out is complete, the interest reverts to Africa Oil Kenya which may consequently work out an agreement for revenue sharing with the other party in the agreement.