Hotel Restopark in Busia town allegedly evaded paying taxes to the tune of Ksh. 892,640. Sources say the hotel management colluded with certain top officers at the Busia County Government to evade paying taxes. The hotel management appealed against the tax demand from KRA at The Tax Appeals Tribunal (Civil Appeal 517 Of 2022) which was dismissed. The ruling dated 19th May 2023 by the tribunal’s chairman Eric Wafula reads “Based on the foregoing analysis the Tribunal determined that the Appeal is not merited. The Appeal be and is hereby dismissed and the objection decision dated 28th April 2022 be and is hereby upheld.”
The Kenya Revenue Authority reviewed the hotel’s VAT returns and issued a notice of finding dated 23rd November 2021. The Hotel management replied via a letter dated 30th November 2021, the hotel management dissatisfied with the KRA had issued a notice of assessment and demand notice dated 17th February 2022 demanding VAT of Ksh. 892,640.00. The management claimed that KRA had failed to amend its return to incorporate the IFMIS payment of Ksh. 5,579,000.00 and input invoices of Ksh. 6,063,387.00 for March 2021 from Busia County and other purchases. KRA had rejected purchase invoices totalling Ksh. 6,063,387.00 with input VAT of Ksh. 836,329.24 and dismissed allegations that Busia County withheld Ksh. 111,580 VAT which was deducted at source.
Investigations by KRA revealed that the IFMIS payments of Ksh. 5,579,000.00 were from Busia County being payments for hotel and accommodation services supplied/provided to the County personnel and stakeholders. When the hotel management got wind that KRA was aware of the county deal, they sought for amendment of its March 2021 return to incorporate the purported omission in the same letter, thereby attaching the payment vouchers from Busia County and the corresponding purchase invoices amounting to Ksh. 6,063,387.00.
The management however admitted that it hesitated in declaring the payments from Busia County upon receipt in March 2021 as it was waiting for Withholding VAT certificates from the County Government. That it had purchased invoices amounting to Ksh. 6,063,387 for the corresponding period which it had not claimed and it was requesting to amend the March 2021 returns.
KRA had cast doubt on management’s claim that it was waiting for VAT Withholding certificates from Busia County for the IFMIS payments to incorporate the same in the VAT returns. The ruling further reads “That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. The taxman on the other hand is entitled to collect up to the last coin that is due from a taxpayer. Consequently, the Tribunal finds that the Respondent did not err in its assessment of VAT on the Appellant”