Kiambu ordered to pay KRA Sh100 million tax

Kiambu Governor Kimani Wamatangi. [File, Standard]

The County Government of Kiambu has lost its appeal against the Kenya Revenue Authority over a Sh100 million withholding tax.

KRA is demanding Sh102,481,447 PAYE and Value Added Tax (VAT) from the county for various revenue streams, motor vehicle benefits, secondary employees, airtime, and servant benefits.

A tax tribunal led by Justices Timothy Vikiru, Jephthah Njagi, Mutiso Makau, and Delilah Ngala said that Kiambu had an obligation to pay tax or enter into an arrangement with KRA.

“The Tribunal holds that the Appellant (Kiambu County) had the obligation to pay the tax not in dispute or enter into an arrangement with the Respondent (KRA) to pay the same. In the absence of which the Appellant has failed to demonstrate compliance with Section 52 (2) of the Tax Procedures Act,” said Justice Vikiru.

KRA had, on August 24, 2023, and September 21, 2023, assessed taxes of sh319,306,389 for PAYE and VAT and sh54,018,150 for withholding taxes, respectively.

The tribunal noted that the initial tax assessment of sh612,390,129 was thrashed out through several correspondences, meetings, and exchanges of documents between KRA and the County.

The county conceded to the tax of sh102,481,447.00, while the KRA insisted on a tax payable of sh156,206,535.00.

The tribunal noted that on June 29, 2023, while conceding to a tax of sh102,481,447.00, the county proposed a payment plan of seven installments with the last payment falling on December 30, 2023.

The county said it paid two installments of sh.15 million and sh.12,481,447.00 on May 9, 2023, and in the month of June, respectively.

However, the tribunal noted that the evidence of the said payment was not sighted, and the county did not provide evidence to show that the said installments for the undisputed tax were paid in full.

In its appeal, Kiambu County said KRA erred in law and in fact by claiming withholding taxes amounting to sh.156,000,000.00 without any basis.

The county stated that KRA erred in law by demanding withholding taxes on transactions that do not attract withholding taxes. 

KRA averred that Kiambu County, having conceded to its tax assessment of sh102,481,447, had a statutory obligation to settle the same before filing an appeal at the Tax Appeals Tribunal.

It said that an analysis of the records provided indicated that the county had made gratuity payments to various employees that were on contract, and the records revealed that the PAYE was not fully accounted for.

KRA said that the additional assessments were raised by charging VAT at a rate of 16 percent on various revenue streams and charging 30 percent on motor vehicle benefits, secondary employees, airtime benefits, and servants.

KRA said that on VAT, the county was requested to provide a detailed breakdown of general charges of revenue streams on PAYE for motor vehicle movement activity logs and any other proof to show that the vehicles in question are pool cars.

The county was also asked to provide evidence of remittance of PAYE on secondary employees in relation to notice of assessment and airtime benefits.

KRA said the county was requested to provide evidence of payment of PAYE on servants in relation to the notice of assessment and also provide employment contracts for the individual servants.

KRA submitted that Kambu County failed to provide documents such as supporting ledgers and invoices and a detailed breakdown of its revenue streams to verify its tax.
obligations and compliance.