Bluejay Limited, the parent company behind Betway Kenya, will be required to pay about KSh 5 billion in outstanding taxes after the Tax Tribunal upheld various assessments by the Kenya Revenue Authority (KRA).
- •The order comes at a time when the company has filed a petition for liquidation at the Milimani Law Courts Commercial and Tax Division, with the matter set to be mentioned before the High Court on the 5th May 2025.
- •In the Tribunal ruling, Bluejay had been faulted for failing to adequately justify a significant portion of its disputed tax positions, particularly in relation to the withholding tax of betting winnings and related-party transactions.
- •Although the tribunal set aside taxes relating to the 2016 financial year on grounds that they were time-barred, it confirmed the majority of the assessments — also including Corporation Income Tax (CIT) and Excise Tax — placing a heavy financial burden on the company.
“While this court as the tax court will facilitate legitimate collection of tax for the economy, it has the same time, the responsibility to guard against overzealousness in tax collection. While taxes are an inevitable and legitimate source of government revenue, we cannot tax everything and anything,” the tribunal stated.
Bluejay Limited challenged KRA’s tax assessments, disputing its calculations for Withholding Tax on winnings and Gross Gaming Revenue, and argued against the disallowance of standard business expenses. The betting firm also contested the penalties imposed, particularly concerning Withholding Tax liabilities.
In essence, Bluejay sought a revised assessment that accurately reflects their tax obligations under the law. The Tribunal found some of Bluejay’s arguments insufficient to overturn key elements of the KRA’s assessment, particularly regarding transfer pricing and the taxability of a loan. It, however, overruled KRA’s KSh 163 million penalty for Withholding Tax citing it as extreme and invalid.
Transfer Expenses
KRA had also tried to disallow certain expenses claimed by Bluejay Limited claiming that they were transactions made with related parties. The six companies involved include Tailby Limited, Gazelle Management Holdings Limited, Head Square (Pty) Limited, Osiris Trading (Pty) Limited, Napier Limited, and Nowell Marketing Limited.
Most multinational firms avoid taxes by receiving services from related firms in other jurisdictions and manipulate expenses to skew taxable profits. To prevent this, tax authorities require that transfer prices adhere to the “arm’s length principle” — which states that the price charged in a related-party transaction should be the same as the price that would be charged in a comparable transaction between independent parties in the open market.
The revenue body wanted to ensure that the fees Bluejay Limited paid to these related companies were justifiable and not artificially inflated to reduce Bluejay’s taxable profits in Kenya. The Tax Appeal Tribunal noted that KRA applied a flawed methodology in disallowing these expenses and castigated it for not properly applying the OECD Transfer Pricing Guidelines.
The liquidation proceeding is also expected to complicate efforts by the authority to recover the outstanding taxes. The developments mark a sharp turn for a company that was once among the most recognizable betting brands in Kenya since its launch in 2006.
