I&M Bank wins $5.5 million tax battle against Kenya Revenue Authority

I&M Bank, the flagship banking arm of Nairobi-based I&M Group, has won a legal battle against the Kenya Revenue Authority after a tax tribunal dismissed a KSh713 million ($5.5 million) claim. Judges ruled that tax collectors mistakenly pursued money the lender had set aside for bad debt buffers, mistaking accounting reversals for taxable write-offs dating back to 2019.

The victory delivers immediate financial relief to the Nairobi Securities Exchange-listed lender, lifting a disputed liability that represented 16.4 percent of its KSh4.34 billion ($33.45 million) tax bill last year. In that period, the group posted a pre-tax profit of KSh24.18 billion ($186.4 million) while remitting KSh4.3 billion ($33.2 million) in direct taxes.

A costly accounting clash

At the heart of the standoff sits a technical clash over how banks account for bad debts. While the revenue authority treated KSh1.3 billion ($10.02 million) as taxable write-offs, the tribunal affirmed the cash was actually a prudential reversal of past provisions banks must hold by law to safeguard customer deposits.

The dispute exposes a bitter, recurring fault line between Kenya’s tax authority and commercial lenders over credit impairment rules. Regulatory guidelines force banks to maintain robust safety cushions against bad loans, with group filings showing KSh18.34 billion ($141.4 million) set aside against gross non-performing loans totaling KSh25.9 billion ($200 million) by June.

Precedent sets industry rules

Tribunal judges have now set a decisive benchmark for Kenya’s financial sector, ending ambiguity over whether provision adjustments can be penalized as undeclared income. The outcome sharply derisks the lender’s exposure, protecting KSh389.3 million ($3 million) in tax recoverable assets against modest payable liabilities of KSh166.58 million ($1.28 million).

The legal win arrives as the banking group demonstrates strong operational momentum across East Africa. Profit after tax for the six months through June rose to KSh9.31 billion ($72 million), up from KSh7.73 billion ($59.6 million), even as credit impairment charges jumped to KSh5.60 billion ($43.6 million).

Regional footprint expands rapidly

The tier-one lender expanded its footprint across Kenya, Tanzania, Rwanda, Uganda and Mauritius, lifting its total balance sheet to KSh746.31 billion ($5.81 billion) from KSh588.92 billion ($4.58 billion). That growth has driven retail and corporate customer numbers past 870,000 across its banking, insurance intermediation, advisory, and asset management subsidiaries.