Kenya Revenue Authority(KRA) has streaked another win after court allowed it to collect Kshs.643 million from Central Rift Valley Water Development Agency (CRVWDA).
The Ksh.643 million is the outstanding withholding tax that the agency failed to collect from two firms contracted to construct Itare Dam Water Supply Project and Sabor Iten Tambach Water Supply Project.
CRVWDA filed for an appeal to the Tax Appeals Tribunal (TAT) on KRA assessment of withholding tax which the state agency failed to collect when it was paying CMC Di Ravenna, the Italian firm contracted to undertake the Kshs.36 billion Itare Dam project in Nakuru County and Aspen International SPRL of Belgium that was contracted to undertake the Sabor Iten Tambach Water Supply Project.
“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.
KRA 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 on May 30,2016, adding that the two foreign companies were for the project related to customs duty and Value added tax (VAT) on goods and services.
Further, the Tribunal 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.