Companies

KRA stopped from raiding China firm

kra john njiraini

John Njiraini, the KRA boss. FILE PHOTO | NMG

A Chinese firm that is building a Sh20 billion mixed development complex in Nairobi’s Westlands area has obtained a court order barring the Kenya Revenue Authority (KRA) from attaching its bank accounts to recover a disputed tax demand.

The High Court last week issued a temporary order barring the taxman from taking any action on Avic International over a disputed Sh3.5 billion tax bill until the Chinese firm’s suit has been heard and determined.

Avic had, through its subsidiary China Aero-Technology International Engineering Corporation (Catic), told the court that the taxman’s demands and subsequent attempt to attach its Sh14.1 billion deposits risk depleting the cash it is using in the property development business.

The KRA had backed up its tax demand on Avic with the issuance of agency notices to Standard Chartered Bank #ticker:SCBK, Equity Bank #ticker:EQTY, Ecobank and Chase Bank asking them to surrender any funds held in the company’s 11 accounts.

The Chinese firm argued in court that the taxman’s move risks hampering its plans to build a Sh20 billion complex in Westlands, next to the five-star Villa Rosa Kempinski hotel.

The 35-storey complex will host residential apartments, office suites and a five-star hotel — setting it up for a battle for patrons with neighbouring Villa Rosa Kempinski.

Avic claims that it has complied with all tax laws, and that it has actually overpaid the same by Sh574 million.

The Chinese firm claims that the KRA acted maliciously in not copying any of the banks it holds funds in when sending out agency notices, a move that risks having all the lenders surrender the cumulative Sh14.1 billion in its 11 accounts to the taxman.

“Such payment will totally cripple and paralyse the construction business of the applicant, who is engaged in massive construction work in Nairobi and in particular the gigantic twin tower construction project next to Villa Rosa Kempinski Hotel on Waiyaki Way, which project has employed over 2,000 workers and is currently under construction,” Avic says through its lawyer Philip Nyachoti.

“Unless the application herein is certified urgent and heard immediately, the said agency notices will be paid simultaneously to the detriment of Catic and thereby debit the applicant’s accounts to the tune of Sh14.1 billion, which action is clearly unreasonable and unlawful.”

The taxman is demanding the Sh3.5 billion in corporation tax and VAT for the years 2013, 2014 and 2015 – demand that Avic has disputed.

Avic has accused KRA officials of refusing to meet its accountants to review its tax compliance, and has instead insisted on talking to a director.

The Chinese firm reckons the refusal is evidence that the taxman was not intent on reconciling due taxes, and that it was on a covert mission to intimidate Avic’s director for ulterior motives.

Avic

From left: Avic chairman Wu Guangquan, Cabinet Secretary Phyllis Kandie, Chinese Ambassador to Kenya Liu Xianfa and Nairobi Governor Evans Kidero at the launch of theAvic business complex. PHOTO | FILE

“Indeed Catic has submitted self-assessment returns. Additionally KRA has refused to audit or investigate them to determine their correctness, but seeks to collect approximated taxes without following due process when indeed Catic has a credit in taxes of over Sh574 million and has offered to furnish KRA with a bank guarantee of Sh200 million while awaiting resolution of the dispute,” Catic says.

Avic has since starting construction of the Sh20 billion complex faced hitches from rival Kempinski, and an individual claiming ownership of part of the land and now the KRA.

Kempinski had in 2015 moved to the National Environment Management Authority (Nema) Tribunal and the High Court to stop construction of the complex, citing environmental and traffic challenges.

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Avic’s complex is also set to include an office block which will also double up as its Africa headquarters.

The Chinese firm claimed in court last year that it had lost over Sh1.8 billion following construction delays for close to 100 days as it responded to Kempinski’s suit.

John Gathumbi, a Nairobi resident, has also filed a suit claiming one of the seven acres of the land hosting the complex.

Mr Gathumbi says he worked for the previous land owner and was awarded one acre as payment for his services. Mr Gathumbi adds that the land was sold to Avic amid an ownership dispute with his former employer’s brothers.