Israeli road constructor SBI International Holdings has won a reprieve from the Kenya Revenue Authority (KRA) which sought to seize Sh3.6 billion it had won in another court case over a tax dispute.
KRA issued agency notices to the Kenya National Highway Authority (KeNHA) seeking to seize money awarded to the contractor following the termination of a contract.
SBI had won an arbitration case against Kenha and was expecting the road authority to pay for variation of costs in three projects including Sh4.5 billion for Kisumu Boys Mamboleo Road, Sh853 million for Ahero interchange and Sh783 million for Ahero interchange.
The Israeli contractor said KRA got wind of the award and issued agency notices to size a tax claim which was still under dispute.
The tax appeals tribunal ruled that KRA had overstepped its mandate and should have asked KeNHA instead to freeze the amounts due to SBI until the tax dispute is heard and determined.
“KRA without any colour of right and before the statutory timelines allowed under the law for the filing of a notice of objection could lapse, issued agency notices to Kenha seeking to enforce the collection of the purported tax liability of Sh3.6 billion,” SBI said.
“This was after KRA got wind that SBI had been awarded a sum of money by the high court in contractual related matters against Kenha,” SBI said.
The taxman issued a demand for back taxes on the Israeli firm accusing it of under-declaring income and value-added taxes and reporting losses from 2016 to 2019.
KRA had already taken Sh400 million from the roads agency when the tribunal issued a stay order arguing the Israeli company is a flight risk and had asked KeNHA to wire the award to foreign accounts transferring the money out of the reach of Kenyan authorities
According to the taxman, during that tax audit sit was only able to trace the company’s local accountants and not its real owners prompting it to take swift action before the money was wired out.
SBI argued it had a viable chance at winning an appeal against KRA and that it had contracts with the Kenyan government running up to 2026 and will therefore be in the country until completion.
They also argued that once KRA seized the funds it would be an uphill task to get refunds and the tribunal agreed that getting KRA to pay back the sum would be a bigger burden on the taxpayer than the taxman waiting for an outcome of the tax appeal.
The tax appeals tribunal also ruled KRA had infringed on SBI's rights and should have asked KeNHA to freeze the award instead of issuing the notices.