Parliament has set a two-week deadline for the management of Chinese firm Huawei Technologies (Kenya) Limited to justify the circumstances under which they were granted a Sh1.92 billion tax waiver by the National Treasury.
The Finance Committee turned away top Huawei managers after they failed to explain why the State waived the billions of shillings due to the Kenya Revenue Authority (KRA).
Huawei Technologies (Kenya) director for enterprise Kevin Wen, appeared before the committee that is inquiring into the circumstances under which former President Uhuru Kenyatta’s regime granted Sh620 billion tax waivers to local and multinational companies during his last term in office.
The companies that benefited from the tax waivers include British multinational currency printer De La Rue, alcoholic drinks manufacturer Kenya Breweries Limited (KBL), and Moja Expressway, which runs the 27-kilometre Nairobi Expressway toll road.
The taxman has since cancelled the tax waivers granted to De La Rue, KBL, National Commercial Bank of Africa, LDK, Maendeleo ya Wanawake Organisation, the Red Court Hotel, which operates under Boma Hotels, and the Ministry of Information and Communication Technology (ICT).
The ICT ministry failed to withhold and remit tax from Huawei Technologies Limited, which related to the construction of the Konza technopolis.
The Treasury also granted the ICT ministry a Sh1.9 billion tax waiver that was owed to it by Chinese company Huawei for laying the fibre optic cables.
The ICT ministry received the tax breaks after the taxman dropped a demand notice for pay-as-you-earn.
The committee chaired by Molo MP Kuria Kimani turned away Huawei Technologies after he failed to provide a written response to the queries raised.
Huawei Technologies entered into a Sh17 billion contract between 2016 and 2019 to lay the National Fibre Optic Backbone Infrastructure II (Nofbi II) and Nofbi II Expansion (Nofbi IIE) projects with the ICT ministry.
“The contract was between the ICT ministry and Huawei Technologies (China) Co., Ltd and not Huawei Technologies (Kenya) Ltd. These are separate companies, and we are not a subsidiary,” said Mr Wen.
But Mr Kimani challenged the managers stating that the KRA had on March 9, 2023, issued a demand notice for withholding tax income (WHT) arrears for the period 2016 to 2019.
Mr Kimani said the terms of the contract required the ICT Ministry to withhold tax from payments made to Huawei Technologies (Kenya) Ltd) during the period 2016-2019 as provided under Sections 2, 10, and 35 of the Income Tax Act Cap 470.
The KRA assessed and demanded WHT from the ICT Ministry amounting to Sh1.953 billion which comprises principal tax of Sh1.43 billion, penalties (Sh71.3 million), and interest (Sh456.7 million).
“You were under obligation to pay the WHT but the ministry was not subjecting the payments made to Huawei Technologies (Kenya) Co ltd to WHT,” Mr Kimani said.
“Now that the ICT Ministry paid you all the money without deducting WHT, what have you done to repay the tax to KRA?”
Mr Kimani said it was after Huawei received the KRA tax demand of Sh1.42 billion that the firm proposed a tax waiver by former ICT Cabinet Secretary Joe Mucheru.
“You went to former ICT CS for the tax waiver. The former ICT CS then wrote to the former Treasury CS Ukur Yatani who granted you the waiver in July 2022,” Mr Kimani said.
“Because you have no written response and your ability to respond to all questions asked, we are giving you two weeks to prepare and submit a written response.”
Mr Kimani directed the Huawei technologies management to appear before it on November 22, 2023.