The Kenya Revenue Authority (KRA) is set to receive Sh1.1billion after a tax tribunal ordered a Chinese company to pay the taxman.
The Tax Appeals Tribunal (TAT) dismissed an appeal by the China Communications Construction Company which was seeking for a tax assessment of Sh1,047,557,661 set aside.
“We find the appellant was involved in an elaborate scheme to avoid tax, Section 21(3) of the ITA which justifies and upholds any assessments or adjustments made by the Commissioner regarding a transaction carried out to avoid tax liability would kick in. The Commissioner was thus justified in its tax assessments of the Appellant. The Appeal lacks merit and the same is hereby dismissed.” The tribunal led by chairman Eric Wafula ruled.
KRA informed the tribunal that tax fraud investigations into the Chinese firm exposed how it fraudulently evaded payment of over Sh1billion tax and transferred income derived through shell companies to accounts in China.
The firm is a majority state-owned, publicly traded, multi-national engineering and construction company founded in China.
The company is engaged in design, construction and operation of infrastructure assets including highways, bridges, tunnels, railways, roads, airports, marine ports and oil platforms.
Investigations conducted by the taxman on the audit of the communication’s Construction Company affairs, issued it with an assessment on February 3, 2023 for VAT and income tax.
From the audit that led to KRA’s rejection of the taxpayer’s VAT input claims, KRA investigations established that the firm was involved in a complex tax evasion scheme.
That it entailed claiming inflated input VAT for purchases that had not been incurred or were not related to genuine business activities using fictitious invoices obtained from both fraudulently registered and non-existent companies to avoid or reduce tax liabilities.
The TAT was shown how China Communications Construction Company Ltd claimed input VAT of purchases of goods and services that were never supplied.
The company objected to the KRA’s assessment and moved to the TAT claiming that the audit was erroneous in fact and in law.
A detailed evidence showed that the Chinese firm claimed inflated input VAT from six fraudulently registered companies whose directors as indicated in the company profiles were not aware of the existence of such companies as well as purchases and financial transactions.
The six companies are Dial an Errand Ltd (Sh638,251,386), Haru Limited (Sh156,532,074), Njafos Holdings Ltd (Sh256,932,293), Masaviru Investment Limited (Sh157,035,000), Math and Kith Investment Company Limited (Sh213,448,586), and Lunza Solutions Limited (Sh221,061,000).