The Kenya Revenue Authority (KRA) has hit Kenya Pipeline Company (KPC) with a Sh174 million tax bill linked to two firms that were awarded a Sh1.1 billion design contract for the Nairobi-Mombasa Pipeline.
KRA on October 23 instructed five commercial banks to remit the tax from KPC’s accounts, a decision that has prompted the State corporation to move to court challenging the action.
The taxman is holding KPC liable for tax due from Sheng Li Engineering and consulting limited and Kenya-based Kurrent Technologies, a consortium that was awarded the tender to design the project in 2012.
“That be an interim conservatory order staying and/or lifting the agency notice dated October 23, 2018 and issued by the respondents to the 1st to the 5th interested parties pending the hearing and determination of this petition,” reads one of the order sought by Kenya pipeline.
The firm, which is fully owned by Kenya government, has listed five banks that hosts its accounts that have been instructed by KRA to remit the arrears as interested parties.
They are Barclays Bank, Standard Chartered bank, KCB bank, Commercial Bank of Africa and Stanbic Bank.
KPC says it raised objections against the demand notice but alleges that it never received any response and says it was shocked to learn that the taxman had gone ahead to collect the tax from its banks.
The firm told KRA that it should direct its tax demand to Sheng Li Engineering and Kurrent Technologies.
Kenya Pipeline says Sheng Li Engineering entered into a joint venture agreement with Kurrent Technologies and undertook to bear all tax obligations.
KPC further alleges that KRA went ahead with tax demand despite offer from Kenya Pipeline promising to remit funds it owes Sheng Li Engineering and Kurrent Technologies once the two firms complete contractual obligations and payment is due.
Kenya Pipeline says the decision to send agency notice to its banks unless suspended by court has potential to hit the distribution of petroleum products in the country.
The two firms are charged with designing new oil pipeline to replace the existing one, which is 35 years old, and enhance operational pumping capacity. The multiproduct pipeline is to be laid alongside the existing 450km line from Mombasa to Nairobi.
It will be designed to meet petroleum product demand in East Africa for the next 30 years.