[Kenya] KRA wins case to collect Withholding Tax amounting Ksh.33.5 billion taxes
The Kenya Revenue Authority (KRA) won a case to collect Withholding Tax amounting to Ksh.33,534,855.00 from Kenya Nut Limited.
KRA had filed an appeal at the Court of Appeal challenging the High Court decision to stop Kenya Nut Limited from paying the taxes on commissions paid to its overseas agents.
The High Court had quashed the assessment Notice of 19th August 2008 demanding the Withholding Tax amounting Ksh.33,534,855.00 and stopped the enforcement of the said demand.
On 24th April 2020, the Court of Appeal ruled in favour of KRA after establishing that given the Company’s exposure and involvement in international trade, the business had the capacity to device practical technique, methods and systems that would ensure collection and remission of the Withholding Tax from source.
The Judges stated that the company ought to have made provision in the contract between them and the agents to ensure that at the point the commission was paid, Withholding Tax should have been factored in and thereafter remitted the same to KRA.
With regard to Withholding Tax due from a non-resident person not having a permanent establishment in Kenya, but trading with a Kenyan entity, the Court of Appeal held that it becomes the business of that entity to ensure that the tax is deducted from such payment and remitted to KRA
The Court also found that it was reckless for the Company to enter into a contract with foreign agents, which allowed foreigners to deduct and retain their commissions without taking into account Withholding Tax. The Court said that this was intended to deny the country revenue.
The Court also found that that interest and penalties were chargeable on the Withholding Tax subject to the applicable rate under the law for the tax period 2000- 2005.
The Court of Appeal held that the Learned Judge of the High Court erred in allowing the Notice of Motion dated 7th October 2008 and issuing orders of certiorari and prohibition against KRA.