Trading firm loses bid to block Sh188m tax claim

The Kenya Revenue Authority has won a case against a trading company, Jarinta (K) Limited, which failed to pay VAT and corporate tax amounting to Sh188.3 million.

The Investigation and Enforcement Commissioner assessed VAT and corporate tax on the importing company at that amount in May 2018. Garenta filed a Notice of Objection the following month but the KRA confirmed the assessment in July 2018.

Aggrieved by this assessment Garenta filed an appeal with the Tax Appeals Tribunal, which upheld the assessment by the tax officer to be valid. This prompted the company to file a case in the Supreme Court against KRA.

In returning the lawsuit, Judge Alfred Mabia said Garenta could only have carried the burden of proof if she had produced documents showing that the purchases had been made.

“Having failed to provide evidence to show that the transactions took place, this court agrees with the court’s decision that the appellant’s claim was unfounded. Accordingly, I find the appeal to be without merit and hereby dismiss it with the costs on the defendant.” .

The KRA told the court that in January 2017, it got wind of information that there were unscrupulous dealers participating in a missing trader scheme.

The missing trader scheme facilitates tax fraud where fake invoices are created and invoices are issued in front of the tax man without any taxable supply.

The lost merchant will enable taxpayers to reduce their VAT liability by claiming input tax from the merchants.

The appellant alleged that he had purchased goods from his suppliers and had provided evidence of the purchase.

The court was told that while investigations were being carried out, the KRA had noted that Garenta had claimed purchases from merchants who the tax man suspected were not trading.

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