Retailer Cleanshelf has overturned a Sh5.9 million tax claim after the Kenya Revenue Authority (KRA) failed to provide witnesses linking it to missing trader tax evasion scheme.
The KRA had claimed that the retailer was a beneficiary of the scheme that involved the use of fictitious invoices to inflate cost of sales through briefcase companies.
It claimed that Cleanshelf bought receipts from Zulma Trading Company to claim for tax refunds, but the KRA failed to produce a key witness at the tax tribunal.
The tribunal said unlike the KRA, the retailer had provided tax invoices, corresponding delivery notes, and goods received notes showing it bought the supplies.
“KRA averred that Cleanshelf merely purchased invoices without attendant goods. However KRA failed to adduce evidence to support its averments,” the tribunal led by Patrick Lutta said.
“It is crucial to note that even though KRA had filed a witness statement with the tribunal it did not call her to testify. Instead it opted to withdraw the filed witness statement on the date the witness was to testify,” Mr Lutta said.
KRA said it identified Zulma traders as part of the companies that were printing and selling ETR invoices without actual supplies with the aim of reducing tax liabilities.
The taxman went after Cleanshelf after it used Zulma’s invoices to file for tax refunds and failed to demonstrate it had bought goods from a legitimate supplier.
According to KRA, Cleanshelf under the ‘know your customer’ policy was obligated to carry out checks to establish the credibility and legitimacy of its suppliers.
The tribunal ruled KRA failed to prove that the retailer was a beneficiary of the tax scam.
The taxman has been facing an uphill task to bring orchestrators of the ‘missing trader tax evasion scheme’ which was said to have been unearthed around 2016/2017 to book.
Unlock a world of exclusive content today!Unlock a world of exclusive content today!
