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A management fees tax dispute has gone KRA’s way. The Tax Appeals Tribunal has upheld the Kenya Revenue Authority’s decision to disallow KSh206,916,394 in management and administration fees that Imperial Managed Solutions East Africa Limited paid to its South African group company between 2020 and 2023.
The 6 November 2026 judgment in Appeal E258 of 2026 partly allowed the logistics firm’s appeal against a tax bill of KSh114,910,276, cutting some items but leaving the biggest deduction disallowed.
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How the dispute started
Imperial Managed Solutions provides freight, warehousing, transport and healthcare logistics services. KRA audited its corporation tax, PAYE, VAT and withholding taxes for 2020 to 2023 and on 22 September 2025 demanded KSh212,392,807, including penalties and interest. After an objection, KRA cut the bill to KSh114,910,276 on 2 January 2026, and the company appealed.
Why the management fees tax deduction failed
The fees were charged by Imperial Logistics South Africa Group (Pty) Ltd. The company relied on OECD transfer pricing guidelines, arguing the services had real value. KRA said related-party charges must be shown to be real and priced at arm’s length.
The tribunal found the invoices charged a fixed monthly “Admin fee” without reference to any service, and no cost pool or allocation was produced for any year. Some activities, such as internal control returns and group reporting, were shareholder activities “for which an independent enterprise would not pay”. For 2020 and 2021, no agreement was in force and no transfer pricing analysis was prepared; for 2022 and 2023 a service agreement existed, but the invoices did not show what was charged for. It added that “a correctly priced charge for an unproven service remains non-deductible”, and noted the record had no time sheets or meeting minutes of the kind accepted in earlier cases.
Management fees tax and other items decided
| Item | Amount (KSh) | Outcome |
|---|---|---|
| Management and administration fees, 2020–2023 | 206,916,394 | KRA upheld |
| Foreign exchange losses, 2023 | 109,675,011 | KRA upheld |
| Credit notes | 69,501,742 of 86,669,364 | Company wins most |
| Cost of sales, 2020–2023 | 19,018,096 | Company wins |
| VAT on imported services | 22,110,290 | Sent back for recalculation |
| Input VAT restriction | 62,275,916 | Sent back for recalculation |
| PAYE on telephone benefit | 183,896 tax | Company wins |
On foreign exchange, the tribunal said losses on foreign currency loans of about KSh470 million that were still outstanding were “losses of translation rather than of realisation”, so they could not be deducted. Beyond the management fees tax question, KRA must issue a revised objection decision within 60 days, and each side bears its own costs.
What it means for companies
Multinationals that pay head-office or shared-service fees should keep proof that each service was delivered, such as time records, minutes and cost allocations, not only an agreement and a benchmarking study. A 6% mark-up within a benchmarked range did not help Imperial, because the tribunal said pricing only matters once the service itself is proven. The management fees tax lesson applies equally to IT, audit and treasury recharges.
The ruling follows other recent tribunal cases, including the Absa KSh317m refund order, I&M Bank’s KSh713m bad-debt case and Premier Foods’ sugar duty dispute. Firms can also consider KRA’s ADR process before litigating.
Frequently asked questions
What is the management fees tax ruling about?
The Tax Appeals Tribunal upheld KRA’s refusal to let Imperial Managed Solutions East Africa deduct KSh206.9m in fees paid to a South African group company, because the services were not proved.
How much tax did KRA demand?
KSh212.4m at first, reduced to KSh114.9m after the company objected. The tribunal then varied parts of that figure.
Did Imperial win anything?
Yes. It won on most credit notes, cost of sales and telephone benefit PAYE, and two VAT items were sent back to KRA for recalculation.
What proof does the tribunal expect for group service fees?
Evidence that services were actually rendered, such as time sheets, minutes, travel records and a cost pool showing how the fee was allocated.
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