Chinese firm, KRA locked in Sh3.2bn tax claim row

Sunday April 16 2017

Kenya Revenue Authority headquarters at the Times Tower in Nairobi. FILE PHOTO | NMG

Kenya Revenue Authority headquarters at the Times Tower in Nairobi. FILE PHOTO | NMG 

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The taxman and a Chinese firm are headed for a major legal brawl over a contested Sh3.5 billion outstanding tax, which the company claims has been exaggerated.

High Court Judge Chacha Mwita last week granted orders stopping the Kenya Revenue Authority (KRA) from demanding the alleged tax, until an application by China National Aero Technology International Engineering Corporation (CNATIEC), is heard and determined.

The firm claims the demand is unjustified and is a threat to its ongoing projects in the country.

The row kicked off on Monday last week when KRA issued four different agency notices to four different banks where the Chinese firm operates accounts, demanding payment of Sh3,534,648,695 for alleged recovery of taxes.

According to the Chinese firm through lawyer Philip Nyachoti, the notices are premature in all respect since the subsisting tax resolution mechanisms set out under the Tax Procedures Act 2015 and the Tax Appeals Tribunals Act have not been exhausted in view of the fact that it has lodged its objection to the Default Assessment made on April 10.

“Despite the objection the firm raised on April 10, which was the last day for any such objection as provided for under the Tax Procedures Act 2015, KRA proceeded to issue agency notices on the same day thereby denying the firm its right to a fair due process prescribed under the law,” said Mr Nyachoti.

The firm is also apprehensive given that KRA has not copied any of the four agency notices to each of the other banks appointed as its agents, and as such there is a real visible and eminent danger that all the four banks could simultaneously debit its bank accounts.

Lawyer Nyachoti said in the event the firm’s accounts are debited to the tune of Sh14 billion, then it will be exposed to enormous financial loss and damage in view of the fact that its construction business and projects will be crippled completely.

It said all its operations paralysed and subjected to other claims from third party sub-constructors on its projects.