In January 2026, Kenya’s Tax Appeals Tribunal delivered a monumental decision in the dispute between Del Monte Kenya Limited and Kenya Revenue Authority.
The ruling offers valuable insight into how tax authorities approach transfer pricing enforcement and what multinational groups must do to remain compliant and defensible.
Background
- KRA audited Del Monte Kenya’s transfer pricing arrangements covering the 2019 to 2021 period.
- The audit resulted in significant additional income tax assessments, which Del Monte formally challenged before the Tribunal.
- At the center of the dispute were intra-group transactions related to the production and export of pineapple products, as well as charges for services, materials, financing and administrative support.
- Del Monte maintained that its pricing reflected arm’s-length conditions relying on the Transactional Net Margin Method (TNMM), supported by benchmarking and a cost-plus mark-up.
- KRA disagreed, challenging both the functional characterization and the selected methodology.
A Different View on Value Creation
- A key issue was how the Kenyan entity should be characterized.
- Del Monte presented itself as a routine entity earning a limited return, with residual profits allocated elsewhere in the group.
- KRA took the position that the Kenyan operations performed are significant and economically important functions.
- KRA viewed the local entity as a core value driver rather than a limited-risk operator.
- This distinction proved critical. If value creation takes place locally, profit allocation must reflect that reality.
Methodology Under Challenge
- KRA rejected the reliance of TNMM and instead applied a method based on resale pricing logic to determine what it considered a more reliable arm’s-length outcome.
- This reflects a broader trend of where documentation or comparability analysis is seen as insufficient, tax authorities may apply alternative methods that they believe better capture economic substance.
Documentation must be Persuasive
- The case highlighted the increasing expectations placed on transfer pricing documentation.
- KRA questioned whether sufficient financial segmentation, comparability support and functional detail had been provided to validate the analysis.
- The companies that were benchmarked were also challenged on the basis of geographic and operational differences.
- Tax authorities are no longer satisfied with high-level studies.
- They expect documentation that connects directly to the business model and demonstrates how pricing reflects actual conduct.
Scrutiny of Intra-Group Charges
- The Tribunal also reviewed charges for services, inputs and financing arrangements.
- These were examined to determine whether they were properly substantiated and whether they delivered measurable benefit to the Kenyan entity.
- This reinforces the need for clear evidence when applying intra-group service charges, including consistent allocation keys and support for the value received.
Outcome of the Appeal
- The Tribunal ultimately upheld KRA’s position and dismissed the appeal.
- The assessment issued by the KRA was allowed to stand, marking an important precedent in the Kenyan transfer pricing landscape.
Practical Impact for Multinational Groups
- Economic substance must align with structure. Tax authorities will examine where decisions are made, where risks are controlled, and where operations take place.
- The functional analysis is fundamental. An inaccurate characterization can undermine the entire pricing model.
- Method selection must be clearly justified. Companies must demonstrate why a method is appropriate and supported by reliable data.
- Documentation must be operationally grounded. Transfer pricing files should link directly to supply chain activities, accounting data, and real business functions.
- Intra-group charges are receiving increased attention. Clear benefit, economic rationale, and consistency are essential.
What This Means for MNEs Operating in Africa
The Del Monte decision illustrates the growing sophistication of tax authorities across Africa.
Enforcement is becoming more aligned with international principles while focusing strongly on protecting local tax bases.
Transfer pricing has moved beyond compliance and should be embedded within the operational and financial fabric of the organization.
At Intelpoint Consulting, we help organizations design transfer pricing frameworks that reflects business reality and withstand regulatory scrutiny. Our approach integrates economic analysis, legal structure and financial data to create defensible and sustainable outcomes.