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Withholding tax on transaction fees to card companies and on interchange fees to issuing banks

Withholding tax on transaction fees to card companies

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This alert brings to your attention the Court of Appeal’s judgment in the case of Commissioner of Domestic Taxes (Appellant) vs. Barclays Bank of Kenya Ltd (now ABSA) (Respondent). The two issues before the Court of Appeal were whether:

a)     transaction fees paid by a bank to card companies are royalties and

b)     interchange fees paid by an acquiring bank to an issuing bank are for management or professional services.

The Court ruled that payments made to card companies are in the nature of royalties subject to WHT. The Court also held that interchange fees qualify as management or professional services hence are subject to WHT.

The link below highlights our summary and opinion on the new Ruling:

KPMG highlights: Withholding tax on transaction fees to card companies and on interchange fees to issuing banks.

 

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