The Del Monte Kenya Tax Case: Key Insights from a Sh6.76 Billion Transfer Pricing Dispute


The Del Monte Kenya Limited tax dispute has become one of the most consequential transfer pricing cases in Kenya’s recent history. While public attention initially focused on a Sh1.76 billion assessment, the case in fact exposes a total tax risk of approximately Sh6.76 billion, arising from multi-year transfer pricing audits by the Kenya Revenue Authority (KRA).

Beyond the headlines, this case offers important lessons for multinational enterprises operating in Kenya.

1. Understanding the Full Sh6.76 Billion Exposure

The Del Monte case is not a single-year dispute. It comprises two separate but related tax assessments arising from similar transfer pricing issues applied across multiple years:

  • Sh1.76 billion – relating to the 2018 year of income, which was the primary subject of the Tax Appeals Tribunal (TAT) decision.
  • Sh4.959 billion – relating to the 2019–2021 years of income, arising from follow-up assessments based on the same pricing model.

When combined, the total tax demand stands at approximately Sh6.76 billion, which explains why the matter is widely referred to as the “Sh7 billion Del Monte tax case.”

Key takeaway:
A single transfer pricing model can generate compounding exposure across several years if not corrected early.

 

2. What Triggered the KRA Adjustments?

KRA’s assessments focused on related-party transactions, including:

  • Pricing of exports to offshore group marketing entities
  • Payment of management, software, and procurement fees to affiliates
  • Interest deductions claimed on intra-group loans

KRA concluded that these arrangements shifted profits out of Kenya and did not reflect arm’s-length outcomes.

If you'd like to talk to a tax and finance expert, you can click here to book a free consultation appointment

 3. Tribunal’s Core Findings

The Tax Appeals Tribunal upheld KRA’s position on several fundamental principles:

a) Substance Over Legal Form

The Tribunal found that Del Monte Kenya undertook significant operational, commercial, and risk-bearing activities locally. As such, it could not be treated as a low-risk or routine entity earning minimal returns.

Lesson:
Tax outcomes follow economic reality, not how entities are labelled in contracts.

b) Arm’s-Length Pricing Must Reflect Functions and Risks

The mark-ups applied to inter-company transactions were considered insufficient given the scale and complexity of Del Monte Kenya’s operations.

Lesson:
Transfer pricing methods must align with what the local entity actually does, not group-wide assumptions.

 c) Documentation Is Not a Formality

Several related-party charges were disallowed due to weak or missing third-party evidence and inadequate benchmarking.

Lesson:
Transfer pricing documentation must be defensible, contemporaneous, and supported by reliable comparables.

 

d) Intra-Group Financing Faces Heightened Scrutiny

Interest deductions were rejected where Del Monte could not demonstrate that loan terms were comparable to independent market financing.

Lesson:
Related-party loans must be priced and structured as if dealing with an independent lender.

 

4. Why This Case Matters for Businesses in Kenya

The Del Monte decision signals a clear enforcement direction by KRA:

  • Transfer pricing audits are increasingly multi-year and high value
  • Profit-shifting allegations will be pursued aggressively
  • Tribunal decisions can validate assessments for subsequent years
  • Tax exposure can escalate rapidly if issues remain unresolved

This case reinforces that transfer pricing risk is no longer theoretical—it translates into real, material liabilities.

 If you'd like to talk to a tax and finance expert, you can click here to book a free consultation appointment

5. RWK Practical Insights: What Taxpayers Should Learn

Businesses with related-party transactions should take proactive steps:

  • Review transfer pricing models to ensure they reflect Kenyan functions, assets, and risks
  • Strengthen benchmarking studies and supporting documentation
  • Reassess intra-group loans and interest rates for arm’s-length compliance
  • Adopt a multi-year risk perspective, not a year-by-year approach
  • Consider Advance Pricing Agreements (APAs) to manage uncertainty

 

Final Thought

The Del Monte case is a reminder that transfer pricing is a strategic tax risk, not a compliance checkbox. Early review, proper documentation, and alignment with economic substance can mean the difference between routine audits and multi-billion-shilling disputes.

RWK Africa continues to advise clients on transfer pricing reviews, audit defense, and dispute resolution in this evolving enforcement environment


For support and advice, contact RWK Africa — your partner in tax compliance.

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