Relief as tribunal blocks taxes on weight-gain drugs

 

Patients using weight-gain drugs have been handed relief after the Tax Appeal Tribunal (TAT) blocked the Kenya Revenue Authority (KRA) from imposing taxes on the medications.

The tribunal ruled that a drug used to help thin people gain weight is not a supplement but a medicine that should be exempted from value-added tax (VAT) and import duty.

The taxman had demanded additional taxes from Harleys Limited for the import of Tres Orix Forte, a drug used to alleviate all types of anorexia in adults and children.

Anorexia is an eating disorder characterised by an abnormally low body weight, with an unwarranted fear of being overweight. Tres Orix Forte helps stimulate the mind to eat which slows down the metabolism and assists in fast weight gain.

The KRA had insisted that Tres Orix was not a medical drug as it did not treat any ailment. As a result, the taxman demanded a 16 percent VAT and 25 percent import duty on the drug. Harleys appealed against the assessment by the KRA, in which the taxman had demanded an undisclosed amount of taxes from the pharmaceutical dealer.

The tribunal ruled against the KRA noting that Tres Orix is registered and retained as a medicine under the Pharmacy and Poisons Act.

“On the basis of the foregoing analysis the tribunal finds that the appeal is merited and accordingly proceeds to make the following Orders…the appeal be and is hereby allowed,” said the six-bench tribunal chaired by Eric Nyongesa Wafula.

The ruling was made on February 9, 2024. The tribunal found that Tres Orix is indicated for the treatment of several illnesses including post-infective anorexia, anorexia in adults, unearned baby anorexia, deficiency anorexia, retarded growth and development, immunocompromised patients, patients recovering from severe trauma and illnesses, and post-operative patients having undergone major surgery.

Goodlife Pharmacy, a major distributor of over-the-counter drugs, is selling 100 milliliter Tres Orix syrup at a retail price of Sh929, which is inclusive of VAT. Without the 16 percent VAT, the retail price of Tres Orix should drop to Sh780.

But the ruling is also likely to blur the line between multivitamins or food supplements and prescription drugs.

Insurance companies do not pay for multivitamins and food supplements as part of their coverage as some of them, such as food supplements for weightlifters, are not used to cure any condition. In the Finance Act 2023, the government gave several tax incentives to turn Kenya into a regional drug-making hub.

To attract foreign direct investment into the pharmaceutical sector, especially for multinationals that manufacture vaccines, the government waived withholding tax on royalties and interest paid to a foreign person by a company undertaking the manufacture of human vaccines in Kenya.

By DOMINIC OMONDI