Thu | Sep 24, 2020

GKRS Guyana wins first round of tax fight

Published:Wednesday | November 13, 2019 | 12:31 AM
GraceKennedy CEO Don Wehby.
GraceKennedy CEO Don Wehby.

GraceKennedy Limited has won the first stage of its legal battle with the Guyana Revenue Authority, GRA, which wanted its remittance subsidiary in that market to pay taxes at a higher rate as a commercial company, which would have resulted in hundreds of millions in back taxes.

The tax authority is trying to appeal the ruling, but GraceKennedy Remittance Services Guyana Limited, or GKRS Guyana, is fighting that effort on the basis that GRA had missed the timeline for filing an appeal.

Both parties will return to court later this month for a ruling on whether the appeal will be allowed to proceed.

The initial case brought by GKRS Guyana, which was fighting its reclassification from a non-commercial to a commercial company, was heard in chambers in March and July of this year. The judge ruled then that GKRS can continue operating at the lower tax rate for non-commercial companies.

The tax authority had charged that GKRS Guyana had been incorrectly classified as non-commercial and therefore owed $225 million in back taxes, excluding penalties, arising from the incorrect classification. GKRS Guyana started operations in 1993.

“The court ruled in favour of GKRS Guyana; setting aside the decision by the tax authority to reclassify the company as a commercial company and therefore reversing the decision by the tax authority-imposed corporation tax at the commercial rate,” said GraceKennedy Limited, a food and financial services conglomerate operational in multiple markets worldwide. The update to the case was disclosed in the conglomerate’s third-quarter earnings report released at the weekend.

The group reported after-tax earnings of $1.4 billion for the September quarter, up from $1.2 billion in the prior year, and $3.7 billion over nine months, which was on par with its 2018 performance. Revenue over nine months rose modestly from $73 billion to $77 billion.

As a non-commercial company GKRS Guyana is subject to tax rates ranging from 27 to 35 per cent, but as a commercial operation, it would be taxed at rates of 40 to 45 per cent, GraceKennedy Group CEO Don Wehby previously told the Financial Gleaner when its dispute with the GRA was first disclosed and reported.

The Corporation Tax Act of Guyana defines a commercial company as one in which at least 75 per cent of the gross income is derived from trading in goods not manufactured by it, inclusive of telecom firms and banks.

The tax authority will go to court on November 22 for a ruling on its efforts to extend the timeline for appeal.

“GKRS Guyana is opposing the application on the grounds that, inter alia, the time for filing an appeal had expired and the court has no jurisdiction to hear the appeal,” GK said.

Meanwhile, in another tax-related disclosure for its remittance business in Jamaica, the conglomerate said that an assessment by Tax Administration Jamaica in March saying GraceKennedy Remittance Services Limited owed $358.87 million, relating to incorrect computation of GCT input taxes, was revised to $15 million in mid-October after the company objected.