China Communications Construction Company (CCCC) has failed to quash a Sh1 billion tax demand by the Kenya Revenue Authority (KRA) after the Tax Appeals Tribunal dismissed its request.
In a blow to the Chinese state-owned firm, the tribunal agreed with the KRA that CCCC was involved in an elaborate tax avoidance scheme as the transactions it was using to claim value-added tax (VAT) input did not support a reasonable commercial transaction.
The Chinese firm stated that it purchases a lot of materials in its line of business, which allows it to claim input VAT from the transactions.
The KRA on its part dismissed the claims saying there were supplies or services as stated but the transactions were created for the sole purpose of transferring money to China and other overseas destinations.
Further, the KRA said CCCC failed to furnish the commissioner of intelligence with delivery notes that bore comprehensive details regarding the delivery of the goods, and the suppliers themselves were frivolous and not anchored in law.
“The tribunal finds that the respondent’s testimony showed that the totality of the Appellant’s transactions did not support a reasonable commercial transaction. It was instead an elaborate scheme to avoid payment of tax in Kenya.
“The appellant’s failure to discharge the burden of proof that had shifted back to it to show that it was not involved in a tax avoidance scheme was not discharged,” the tribunal chaired by Eric Nyongesa Wafula said.
According to the tribunal, the law places the burden of proof on the taxpayer at all times and it was upon CCCC to provide evidence on the transactions it was claiming.
“The appellant failed to address the issues of fraud and tax avoidance schemes raised by the respondent’s witness.
“The moment the said witness (KRA witness) completed its testimony asserting that the appellant had been involved in an elaborate tax avoidance scheme the burden of proof shifted to the appellant to provide evidence by way of affidavit, witness statement, or otherwise to rebut these assertions,” the tribunal said.
