Trade and Industry Cabinet Secretary Moses Kuria has temporarily won a Sh119.6 million tax fight against the Kenya Revenue Authority (KRA) after a tribunal ordered the taxman to conduct a fresh assessment of his liabilities.
The taxman had issued a demand of Sh119.6 million for 2015 and 2019 when the CS served as Gatundu South MP but Mr Kuria objected to the claim saying it was excessive and KRA was taxing reimbursements from related companies as income or gains.
He further said the bank transactions took place in 2017 and 2018 during the campaigns and elections season and he was only an agent in the transactions, retaining a small portion as his agency fees.
“From the foregoing analysis, the Tribunal finds that the Respondent (KRA) was not justified in confirming its assessments for income tax,” the tax appeals tribunal chaired by Eric Wafula ruled.
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The tribunal directed the KRA to conduct a fresh tax assessment on Mr Kuria’s tax liabilities arising from the bank deposits based on the industry ratio of 17.09 percent.
The KRA said it carried out investigations into the former MP’s tax affairs in the year 2020-2021 from 2014-2019 after there were allegations against him of misuse of CDF funds.
The taxman obtained compliance history from internal databases, copies of official records from the Registrar of Companies, and third-party information from Equity Bank, related companies and his clients.
It later wrote to the CS in March 2021 informing him of the undeclared income amounting to Sh297.7 million, which attracted a tax liability of Sh89.1 million and asked for payment.
He objected to the claim and the KRA later increased the amount and demanded Sh119.6 million for corporate tax.
Mr Kuria then moved to the tribunal, arguing that it was wrong for the taxman to charge all bank transfers from his related companies, which are reimbursements for operational costs advanced to the firms.
“The respondent erred in law and fact in determining the reimbursements to the Appellant for operational costs advanced to the Appellant’s related companies are taxable income under Section 3(2)(a) (i) of the Income Tax Act,” he argued.
The CS confirmed that he was a director and shareholder of Smith & Gold Productions Ltd, Proactive Media Ltd, Atix Engineering Ltd, and KIPEDA Trans African Energy, Ashes to Gold Africa, Fanaka Mobile Ltd, Fanaka Television Ltd, Emerging Capital Holding Ltd and Brandmasters Ltd.
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Mr Kuria said he financed the day-to-day operational costs of the companies by transferring cash into the bank accounts of the companies and tabled evidence of bank statements.
The CS also said being a public figure he received cash as an agent for undisclosed principals and only retained a small portion of the net transactions as agency fees.
Mr Kuria argued that through an analysis of the companies doing business and other consultancy activities in construction, the weighted average operating profit is 17.09 percent, which KRA should have as opposed to taxing all cash deposits in his account.