The High Court of Kenya has nullified a Sh384.5 million stamp duty exemption granted to NCBA Group following the 2019 NIC-CBA merger. Justice Chacha Mwita ruled that the tax break, authorized through Legal Notice No. 112 by the National Treasury, was unconstitutional and failed to meet the legal requirement of public interest. The ruling marks a victory for activist Okiya Omtatah, who filed the case in 2019, challenging the legality of the exemption.
The court found that the exemption violated Section 106(1) of the Stamp Duty Act, which grants the Cabinet Secretary discretionary powers to offer tax reliefs strictly in the public interest. Justice Mwita concluded that this condition was not satisfied, stating that the exemption was not made in public interest and therefore the discretion conferred by that section was not properly exercised. He added that the exemption favored private interests and undermined the constitutional principle of equitable tax burden sharing under Article 201.
The 2019 NIC-CBA Merger and Controversial Exemption
The NCBA Group was formed after a merger between NIC Bank and Commercial Bank of Africa (CBA), completed in October 2019. The deal created Kenya’s third-largest bank by assets and was structured as a share swap. CBA shareholders, including the Kenyatta and Philip Ndegwa families, took a 53% stake in the merged entity, while NIC shareholders held the remaining 47%.
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To facilitate the transaction, then-Treasury CS Henry Rotich issued a legal notice exempting the transfer of unquoted CBA shares from stamp duty, saving NCBA an estimated Sh384.5 million. Critics, including Okiya Omtatah, argued that the exemption lacked transparency and appeared to benefit politically connected individuals. The tax, typically levied at 1% on such transactions, was waived without sufficient justification.
Legal Challenge by Okiya Omtatah
Omtatah challenged the NCBA tax exemption in court, citing violations of both the Constitution and the Stamp Duty Act. He argued that the process was opaque, not properly gazetted, and lacked justification of public benefit. His petition emphasized that the move represented a misuse of discretionary powers to serve elite interests.
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In 2023, Treasury CS Njuguna Ndung’u revoked the exemption and instructed the Kenya Revenue Authority (KRA) to recover the tax. NCBA responded by obtaining a temporary court order to block the collection, arguing that the reversal breached their constitutional rights, including the right to fair administrative action under Article 47.
The High Court Ruling
On April 4, 2025, Justice Chacha Mwita ruled decisively in favor of Omtatah, declaring the exemption null and void. He emphasized that NCBA’s correspondence with Treasury revealed a pursuit of private interests rather than a national or public agenda. The judgment reinstates NCBA’s Sh384.5 million tax obligation, a sum that may increase with interest depending on the outcome of any appeal.
NCBA has since expressed its intention to appeal the ruling at the Court of Appeal, stating its commitment to comply with the final judicial outcome.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.