Africa Oil Corp (TSX:AOI) has provided an update on its appeal process in relation to Kenya Revenue Authority's (KRA) corporate income tax (CIT) and value-added tax (VAT) assessments, made in connection with farm-out transactions completed during the period of 2012 to 2017.
On April 8, 2020, Africa Oil announced that Kenya Tax Appeals Tribunal (TAT) had ruled on the company's appeal related to KRA's CIT and VAT assessments, made in connection with farmout transactions completed during the period of 2012 to 2017.
TAT ruled in favour of the company with regards to the CIT assessments and in favour of KRA with regards to the VAT assessments. Subsequently, Africa Oil filed an appeal with the High Court of Kenya to challenge the VAT decision and KRA filed an appeal in relation to the CIT decision.
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On 30 November 2022, the High Court of Kenya announced its decisions on the company's Tax Appeal Case Number 024 (consolidated with KRA's Tax Appeal Case Number 051), and the judgment was made available to the company.
The company's appeal with regard to the VAT assessment was partly successful and the High Court concluded that the company owes VAT in an amount of Kenyan Shillings 2,293,334,065 (approximately US$18.7 million). The KRA's appeal with regard to the CIT decision was partly successful and the High Court concluded that the KRA was correct to disallow certain costs claimed by the company; however, the High Court's decision on the KRA's appeal with regards to CIT is not expected to have a material cashflow impact to the company.
Africa Oil said it is taking legal advice on the options available to it in view of this decision, including the option to appeal.
In a separate statement, as a result of the latest quarterly review, S&P Dow Jones Indices said Africa Oil will be added to the S&P/TSX Composite Index prior to the open of trading on Monday, December 19, 2022.
The company is a Canadian oil and gas company with producing and development assets in deepwater Nigeria; development assets in Kenya; and an exploration/appraisal portfolio in Africa and Guyana.
Contact the author at jon.hopkins@proactiveinvestors.com