The Kenya Revenue Authority (KRA) has scored a massive victory in its war against profit shifting, as the Tax Appeals Tribunal upholds a Sh6.76 billion tax demand against fruit processing giant Del Monte Kenya.

The tribunal’s ruling peels back the layers of a complex corporate structure designed, according to the KRA, to bleed profits out of Kenya and into the coffers of foreign entities. At the heart of the dispute is Del Monte Kenya’s relationship with its "sister" firm, the Switzerland-based Del Monte International GmbH.

The Transfer Pricing Trap

The tribunal found that Del Monte Kenya was selling fresh and processed pineapples to its Swiss sister company at prices that did not reflect the true value created in Thika. This practice, known as transfer pricing, effectively lowered the company’s taxable income in Kenya while boosting profits in a lower-tax jurisdiction.

"The prices charged to the related party were not at arm's length," the ruling stated, vindicating the taxman’s aggressive audit. It is a classic case of a multinational privatizing profits and socializing costs.

• The Scheme: By underpricing exports to its sister firm, Del Monte Kenya declared lower profits locally, paying less corporate tax.
• The Interest: The firm also claimed interest deductions on loans from its parent company, further reducing its taxable income—a practice the tribunal ruled was skewed to favor the foreign entity.
• The Impact: The Sh6.76 billion demand is a significant boost for the KRA, which is under immense pressure to meet ambitious revenue targets set by the Treasury.

A Warning Shot

This ruling sends a chilling message to other multinationals operating in Kenya. The days of using creative accounting to dodge the taxman are numbered. The KRA has invested heavily in its transfer pricing unit, and the Del Monte case proves they have the capacity to unravel even the most sophisticated global structures.

For the ordinary Kenyan taxpayer, who is squeezed by every transaction, there is a grim satisfaction in seeing a corporate giant forced to pay its fair share. But for Del Monte, this is a financial earthquake that could reshape its operations in the region.

What Next?

Del Monte is likely to appeal the decision, setting the stage for a protracted legal battle that could go all the way to the Supreme Court. But the precedent has been set: Kenya is no longer a playground for profit shifters. If you make money in Thika, you pay tax in Nairobi.