Tax Appeal Tribunal has ordered Central Rift Valley Water Development Agency (CRVWDA) to pay the Kenya Revenue Authority (KRA) Kshs. 643M as outstanding withholding tax it failed to collect from two firms contracted to construct Itare Dam Water Supply Project and Sabor Iten Tambach Water Supply Project.
The move follows an appeal by CRVWDA on KKRA assessment of withholding tax amounting to KShs. 643,394,426 which the state agency failed to collect when it was paying CMC Di Ravenna, the Italian firm contracted to undertake the Kshs. 36B Itare Dam project in Nakuru County and Aspen International SPRL of Belgium that was contracted to undertake the Sabor Iten Tambach Water Supply Project.
KRA which was the Respondent in the case had successfully argued that the two foreign companies were not exempt from Income Tax in Kenya and the services offered in the project were in the nature of management and professional services that are subject to Withholding Tax under the Income Tax Act.
According to KRA, the National Treasury did not exempt CMC Di Ravenna from income tax in Kenya from its letter dated 30th May 2016.
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“This position is confirmed by the National Treasury in the value added tax master exemption letter dated 30th May 2016 which expressly states as follows; “please note that withholding tax on income is payable.” The exemption on income was further clarified by the National Treasury through Technical Circular No. 15/2019 issued on 11th December 2019,” stated the Tribunal.
The Tribunal further stated that the two foreign companies were not exempt from Income Tax and that CRVWDA ought to have included the amount to be withheld in the payment certificates it prepared but failed to do so.
The taxman further states that exemption granted to CMC Di Ravenna and Aspen International SPRL were for the project related to customs duty and Value added tax (VAT) on goods and services as per the exemption letter from the National Treasury dated 30th May 2016.