Table of Contents
Key Points
- Kenyan tycoon Rupen Haria wins $3.2 million tax case over Harleys Limited share sale executed before CGT hike.
- Court rules capital gains tax applies on sale date, not registration, safeguarding $2 million original payment.
- Ruling may affect $85.1 million in similar pre-2023 deals, clarifying CGT timing for investors and authorities.
Kenyan pharmaceutical tycoon Rupen Mulchand Haria, former managing director of pharmaceutical distributor Harleys Limited, has won a Ksh417 million ($3.2 million) tax dispute against the Kenya Revenue Authority (KRA) over the sale of his shares.
The Kenya High Court overturned a Tax Appeals Tribunal ruling that had allowed KRA to demand additional capital gains tax (CGT) after Haria sold 5,910,000 Harleys Limited shares to Mauritius-based Westlands Heights Limited. on Dec. 30, 2022.
The transaction, valued at $40 million, is now set as a reference for other investors who face similar CGT assessments following changes in the law.
Haria pays original tax rate
Justice Ochieno clarified that CGT on share transfers is calculated based on the date when the shares are legally and economically transferred, meaning the moment the sale is executed and payment is received. In Haria’s case, that date was Dec. 30, 2022, not the later registration date of Jan. 4, 2023.
The Finance Act 2022 had tripled CGT from 5 percent to 15 percent starting in January 2023. Because Haria’s sale took place before this change, his original payment of Ksh260.2 million ($2 million) at the 5 percent rate remains valid.
Capital gains timing clarified
The court rejected the Tribunal’s position that registration should determine the tax rate, effectively canceling KRA’s additional Ksh417 million ($3.22 million) demand. Legal experts say the decision could affect at least Ksh11 billion ($85.1 million) in similar deals that were executed before January 2023 but registered afterward.
The ruling highlights that CGT is self-assessed and payable when a sale is executed, not when administrative paperwork is completed. For investors, this provides clear guidance on when gains are taxed. For tax authorities, it limits the use of registration delays to increase liabilities.
The decision could also influence ongoing disputes, including those involving land transfers, where KRA has applied the 15 percent rate based on registration dates rather than the actual transaction date.
Stake in M Oriental Bank
Beyond pharmaceuticals, Haria has a diverse business portfolio. He holds a 4.11 percent stake in M Oriental Bank, a Nairobi-based commercial bank formerly known as Oriental Commercial Bank.
Through partnerships with M Holdings, the bank provides programs to build capacity among entrepreneurs while offering financial solutions designed to improve the banking experience in Kenya.
