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Goldplat witholds royalties over tax refunds

By Macharia Kamau | Published Thu, October 4th 2018 at 10:00, Updated October 4th 2018 at 10:05 GMT +3
Kilimapesa gold mining plant in Narok County owned by UK company Goldplat.

A dispute over tax refunds between the Kenya Revenue Authority and a gold miner has seen the Government miss out on royalties from the sale of the mineral over the past financial year.

Goldplat, the UK firm operating the Kilimapesa goldmine in Narok, has withheld royalties in excess of Sh23 million that would have been split three ways with the national and county governments as well as the communities getting a share of the money.

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The firm, in its annual report published Tuesday, said it would pay the royalties once it received a value added tax (VAT) refund of over Sh139 million from KRA.

“Kilimapesa Gold has royalties payable to the Kenyan Government in arrears to the amount of £177,000 (Sh23 million). The company is planning to pay the royalties from outstanding VAT claims receivable and future revenues,” it said.

The firm, whose Kenyan unit made a net loss of £892,000 (Sh116 million) despite growth in gold production in the year to June, said it has been in talks with KRA for several years in a bid to resolve the VAT refund issue.

It said it was frustrated by the tax authority, with the amount of money that it has been claiming growing every year. As of June 30 this year, Goldplat said it was owed Sh139.6 million.

“Trade and other receivables for the group include a balance of £1,074,000 (Sh139.6 million) up from £812,000 (Sh105.6 million) in the 2017 financial year of value added taxation receivable from KRA. Of the current balance £542,000 is older than three years,” said the firm.

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“Despite clear provisions in the Kenyan legislation regarding the recoverability of VAT, and two audits and continuous consultation with KRA, the balance due remains outstanding.”

Miners pay royalties at a rate determined by the Mining Cabinet secretary, which is currently at about 2.5 per cent of revenues, but there are plans to revise it to five per cent.

The money is supposed to be shared between the Government and the communities from the mining region.

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According to the Mining Act, communities are entitled to 10 per cent of the royalties paid to Government while the county governments are entitled to 20 per cent share. The national government keeps the balance of 70 per cent.

Sharing formula

The share to the communities and county governments is currently being retained by Treasury owing to lack of a revenue-sharing framework.

The Mining ministry has in the past said it is developing the Mineral Royalty Fund, which will manage cash paid by mining firms, including channelling payments to the Government, counties and communities.

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