Peter Mukuha Kago, an heir of supermarket chain Naivas Limited, has won a Sh777 million tax dispute against the Kenya Revenue Authority (KRA). The dispute was over the financial operations of Achievo Limited, a firm associated with Mr. Mukuha that provides staffing and recruitment services to Naivas. The High Court ruled in favor of Achievo, arguing that the bulk of the cash it received from Naivas was not taxable income because it was for salaries and other staff costs.
The dispute began after an audit of Achievo's financial books between 2019 and 2023, which triggered a demand of Sh777 million in value-added tax (VAT) and Sh102 million in income tax. The KRA had initially asked for a sum of Sh962.7 million but revised the figure downwards to Sh777 million following an objection by Achievo. The court ruled that money Achievo received from Naivas to pay staff was a disbursement and therefore not subject to VAT and income tax.
The court's decision overturned a May 2025 Tax Appeals Tribunal decision that had upheld KRA's demand from the audit against Achievo. The judge stated that the Tribunal's reasoning and conclusions were incorrect, particularly in elevating the failure by Achievo to avail bank statements as a decisive factor in the case. Achievo was incorporated in 2013 and is linked to Naivas' heir Peter Mukuha Kago, a member of the family of the retailer's founder who died in 2010.
Achievo provided workers to Naivas Limited, with which it is associated by common directorship. Under a Service Level Agreement between it and Naivas, Achievo was mandated to hire staff and deploy them to work for Naivas supermarket stores. The court found that the money Achievo received from Naivas to pay staff was a disbursement and therefore not subject to VAT and income tax. It said that the money was reimbursements, not income earned by the company.
The KRA had treated amounts paid by Naivas to Achievo, including salaries and statutory deductions for workers deployed to Naivas stores, as taxable value for VAT. However, Achievo contended that it received and disbursed the money, described as the staff costs, without mark-up, as an agent of Naivas Limited, separately from the agency or management fee on which it duly accounted for VAT.
The dispute centered on Section 13(5) of the VAT Act, which generally includes costs incurred by a supplier when providing services, but excludes payments made by an agent for a client. The court held that the tax assessment and objection process did not require Achievo to prove that every shilling received for staff costs had been paid to employees. The court also referred to changes made by the Finance Act 2026, which expressly excluded employee costs, salaries, statutory deductions, and other employment-related costs in labor outsourcing arrangements from VAT.
The judge stressed that the amendments did not apply to Achievo's disputed period but said they were consistent with what he considered a clarification of the existing position. The court upheld the Tribunal's finding that Achievo and Naivas had an agency relationship under their agreement and addendum. The court found that the direct staff costs matched the payroll records and that KRA had not alleged that Achievo retained any part of the money or added a profit margin.
Key points
- Peter Mukuha Kago, heir of Naivas Limited, wins Sh777 million tax dispute against Kenya Revenue Authority over HR firm Achievo Limited.
- The dispute was over the financial operations of Achievo Limited, a firm associated with Mr. Mukuha that provides staffing and recruitment services to Naivas.
- The court's decision overturned a May 2025 Tax Appeals Tribunal decision that had upheld KRA's demand from the audit against Achievo.
