- April 7, 2025
- Posted by: admin
- Category: Uncategorized
Case Study: Tazama Distributors Limited v Commissioner of Investigations and Enforcement (Tax Appeal E102 of 2024) [2025] KETAT 70 (KLR) (17 January 2025) (Judgment)
KRA stated that it commenced investigations into the tax affairs of TDL following receipt of intelligence that TDL was involved in tax evasion schemes. KRA issued to TDL its preliminary tax investigations findings on 20th June 2023, and on 27th September 2023, issued tax assessments of Corporation tax, Value Added Tax (VAT) and Withholding VAT.
In this article we will dwell on Withholding VAT only.
On 11th October 2023, TDL objected to the additional assessments, and KRA issued an Objection decision on 8th December 2023 partly allowing TDL’s Objection.
TDL appealed to the TAT.
TDL did not make any pleadings against this assessment
KRA argued that:
- TDL had failed to remit Withholding VAT (WHVAT) and therefore imposed a penalty on TDL for the offence of not withholding and remitting WHVAT
In its judgment on 17/01/2025, The TAT observed that:
- Section 42A(4C) and (4D) of the Tax Procedures Act provides as follows regarding failure of a withholding agent to withhold VAT: –
(4C)A person who is required under this section to withhold tax commits an offence if the person
(a)Fails to withhold the whole amount of the tax which should have been withheld; or
(b)Fails to remit the amount of the withheld tax to the Commissioner by the twentieth day of the month following that in which the deduction was made.
(4D)A person who commits an offence under subsection (4C) is liable on conviction to a penalty of ten per cent of the amount involved.”
- The construction of Section 42A(4D) of the Tax Procedures Act, the provision under which KRA assessed the 10% penalty on Withholding VAT, applies only on conviction of a taxpayer for an offence under Section 42A(4C) of the Tax Procedures Act.
- KRA did not present any evidence of TDL having been convicted of an offence under Section 42A(4C) of the Tax Procedures Act. For this reason, the Tribunal found that KRA erred in assessing the penalty on Withholding VAT in the absence of TDL’s conviction of an offence committed under Section 42A(4C) of the Tax Procedures Act.
TDL won on this ground.
https://hisibati-consulting.co.ke/blog/
