Seven Seas Technologies, headed by businessman Michael Macharia, will pay Kenya Revenue Authority (KRA) Sh900.4 million after losing a case against the agency at the Tax Appeals Tribunal.
The technology firm, which has clients in financial services and healthcare in Kenya and other African nations, failed to provide additional documents to ward off KRA’s demand relating to value-added tax (VAT), pay-as-you-earn (PAYE) and withholding taxes.
The taxman had slapped Seven Seas with the claim on August 27, 2020 for the period between 2015 and 2019.
The firm objected to the demand on September 22, 2020. KRA wrote back to Seven Seas on March 10, 2021, affirming its claim, which has now been backed by the tribunal although the company had filed an appeal.
“In view of the above analysis, the tribunal finds that the respondent’s tax demand is due and payable,” the tribunal ruled in a decision issued on January 26, 2024.
“The upshot of the above is that the appeal lacks merit and, therefore, fails and the tribunal will now proceed to make the following final orders,” the tribunal added, ordering each party to bear its costs and upholding KRA’s reiteration of its tax demand on March 10, 2021.
With regard to withholding taxes, the KRA’s Commissioner of Domestic Taxes wanted Seven Seas to provide it with invoices for outstanding transactions for third parties the tech company had engaged.
KRA also wanted evidence relating to Data GRS, a South African company that Seven Seas had engaged to help with the migration of information in relation to a project the company had with Safaricom known as XABA.
Xaba was aimed at connecting blue-collar workers with potential employers. The KRA had computed withholding taxes amounting to Sh1,469,704 on payments made to Data GRS for payment of services it offered to Seven Seas. Seven Seas was required to give evidence exhibiting why the payments to Data GRS should not attract withholding tax as it had claimed. The company also claimed that the Xaba project had been deducted withholding taxes twice. However, no evidence was adduced supporting the assertion.
On the 16 percent VAT, Seven Seas did not back up its claim that the services being taxed were exports. The company did not give proof of payment for services rendered outside Kenya or details of personnel executing the services such as copies of passports including the entry and exit stamps.
On PAYE, Seven Seas had claimed director fees of Sh24,431,521 for years 2014 and 2015 were reimbursements to the directors after the latter had used their money to pay employees.
However, the company did not furnish the KRA with the directors’ bank statements to demonstrate that directors’ fees as declared in the financial statements were indeed reversed and that the directors did not enjoy the benefits.
