Del Monte Kenya Slammed with KSh 1.76B Tax Verdict:

Kenya’s Tax Appeals Tribunal has upheld a massive KSh 1.76 billion tax demand against Del Monte Kenya, validating the Kenya Revenue Authority’s (KRA) claims of profit-shifting through dubious transfer pricing practices.

This ruling spotlights ongoing battles between tax authorities and global firms operating in Kenya, with broader implications for revenue collection and economic fairness.

“The tribunal found that the pineapple giant could not justify why it was shifting profits to offshore companies when the real value of the business is created in Kenya,” read part of the ruling.

The Heart of the Dispute

Del Monte Kenya, the Thika-based pineapple giant, faced a KRA audit for 2018 revealing understated taxable profits from sales to its Swiss affiliate, Del Monte International GmbH (DMI GmbH).

“The Respondent erred in fact and in law by disregarding the Del Monte functional analysis, resulting in an incorrect characterization of the Appellant and assessing tax on the related party’s transaction on the sale of fresh and processed pineapples based on the assumption that the Appellant did not earn an arm’s length return, leading to margin adjustments.”

The company applied a mere 4.83% markup on costs, which the tribunal deemed inadequate for its role in growing, processing, and bearing key risks ruling prices fell short of “arm’s length” standards between unrelated parties.

Additional disallowances included millions in recharged costs for software and admin from affiliates, lacking source documents, plus KSh 415 million in interest on a loan from Del Monte Fund B.V., deemed lacking substance.

The tribunal rejected the company’s Transactional Net Margin Method, insisting the simpler Swiss distributor should be the “tested party.”Tribunal’s Key FindingsIn a January 16, 2026, decision, the five-member panel chaired by Christine Muga dismissed Del Monte’s appeal outright, upholding principal tax, penalties, and interest.

“KRA in its pleadings stated that it had indeed sought the information from the registry records and therefore confirmed the ownership and relationship between the Del Monte and the enterprises engaging with it in cross-border transactions,” the tribunal stated.

Evidence showed the lender was Swiss-owned, undermining the firm’s structure claims, while functional analysis confirmed Kenya’s entity drove value creation.

This isn’t isolated: separate rulings piled on KSh 4.96 billion for 2019-2021, totaling over KSh 6.7 billion in disputes, underscoring repeated audit failures.

Transfer Pricing Explained: Kenya’s Growing Weapon

Transfer pricing governs intra-group cross-border deals, preventing profit erosion to low-tax havens like Switzerland or Cayman Islands.

KRA alleges Del Monte shifted billions in profits abroad by underpricing Kenyan exports, starving local tax coffers amid economic pressures.Kenya’s push aligns with global OECD guidelines and Finance Act 2025’s Advance Pricing Agreements (APAs), letting firms pre-agree methods.

Recent wins against multinationals aim to boost collections vital as Kenya grapples with debt, funding needs, and youth unemployment.

Impacts on Del Monte and Kenyan Economy

For Del Monte, the bill threatens operations at its 4,000-hectare farm employing thousands, potentially hiking fruit prices or squeezing margins. It joins past tax woes, testing resilience in export markets.

Nationally, victories like this could add billions to budgets for infrastructure, health, and education resonating with Gen Z demands for equitable growth. This highlights it as a pivot against “privatizing profits while socializing costs.” Yet, firms warn overzealous audits deter investment.

This sets precedent for peers like Unilever or East African Breweries under similar scrutiny, accelerating KRA’s digital audits and APA adoption.

Del Monte may appeal to the High Court, prolonging the saga.Businesses should audit related-party deals, document arm’s-length pricing rigorously, and explore APAs. For citizens, it’s a reminder: tax justice funds public services.p0