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Mobius fears insolvency if it pays KRA Sh85m tax arrears

By Kamau Muthoni | November 14th 2020 at 00:00:00 GMT +0300

The Mobius II car. The Kenyan built car was developed by Mobius. It was launched in 2015. [Courtesy]

Kenyan automobile startup Mobius Ltd claims it will collapse if it is forced to pay a Sh85 million tax demand by Kenya Revenue Authority (KRA).

While appearing in court yesterday, Mobius said if KRA is allowed to effect a tax tribunal verdict requiring it to pay the money, the decision will end its nine years of life in the market.

Mobius claims that its financial books are in the red. The startup said it will not survive the next 12 months if KRA invades its accounts at Absa Bank and Standard Chartered Bank.

“The appellant is presently in dire financial strain as demonstrated in its financial records,” Mobius lawyers said.

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“The appellant, therefore, stands to suffer irreparable harm if the stay of execution orders sought herein are not granted.”

The firm, in its appeal before the High Court, proposed that it should be allowed to deposit Sh10 million as security in a bid to stop KRA from claiming the disputed money.

However, KRA is of a different opinion. The taxman wants Mobius to be ordered to deposit Sh45 million as security. The remainder of the money is to be secured through a bank guarantee.

“It has not been proved that in the event of the recovery of taxes, the appellant’s business will be crippled to a point of shutting down,” KRA argued.

KRA claims that Mobius owes it Sh55 million principle tax, Sh11 million interest, and Sh18 million penalties.

While disputing the amount, Mobius said it only owes KRA Sh12 million and proposed to pay the contested amount in 10 installments.

From its website, Mobius was set up in Kenya in 2011 by its founder Joel Jackson. Its first-generation Mobius II vehicle was launched in 2015.

KRA, however, demanded that Mobius should pay the uncontested amount in four installments.

It said it has a critical task of collecting money to run the country’s budget.

According to court records, KRA is pursuing Mobius for withholding tax on software purchases, consultancy services, royalties and some expenses incurred by Mobius in the United Kingdom.

Mobius financial controller Sammy Muthui, in his supporting affidavit, claimed that the firm has 50 full-time employees.

Mr Muthui said the company is waiting for government approval to manufacture ventilators to support Kenya’s fight against Covid-19.

An audit report attached to the court record indicates that Mobius incurred a Sh425 million loss in 2018 while its liabilities exceeded its current assets by Sh 434 million. The firm made a Sh45,817 profit in 2018 and Sh295,196 in 2019.

Kenya Revenue Authority Mobius KRA
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