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JKUAT entangled in Tatu City land tax evasion claims

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Signage at Tatu City. FILE PHOTO | NMG

Juja-based Jomo Kenyatta University of Agriculture and Technology (JKUAT) has been entangled in the ongoing fight for Tatu City after it was named among the firms that bought land in the vast estate at a higher cost than was declared for purposes of taxation.

Stephen Mwagiru, a minority shareholder in the multibillion-shilling real estate development, has submitted to Parliament documents to back his claims that his foreign partners have been cheating the government of tax revenues while repatriating billions of shillings from the sale of land in Kenya to offshore accounts in Mauritius.

Mr Mwagiru has submitted to Parliament piles of documents, including land sale and tax payment records showing that Tatu City Limited and Kofinaf took long routes to completing the transactions in order to deny the taxman his share of stamp duty and income tax.

READ: Tatu City directors accuse foreign partners of tax evasion

READ: Land officials entangled in Tatu City fraud claims

Top on the list of transactions described in the documents as fraudulent is the April 2010 sale of land to JKUAT at a price of Sh842.4 million and Tatu City’s ultimate declaration of Sh235 million as the sale value for purposes of taxation.

Splendor Investments, another company that has invested in the vast development, bought two parcels of land whose combined value of Sh2 billion was declared as Sh559 million for purposes of taxation.

Official Ministry of Land and Kenya Revenue Authority (KRA) records attached to Mr Mwagiru’s affidavit show that Splendour purchased LR 11486 at a price of Sh1.19 billion but Tatu City declared a paltry Sh340 million as the sale value against which payable taxes were calculated.

The company also purchased LR 11428 at a cost of Sh884 million but Tatu City merely declared Sh219 million for purposes of taxation.

Seven days

Mr Mwagiru’s latest submissions are in compliance with the seven days that the National Assembly’s Lands Committee gave him to provide evidence supporting his claims of Tatu City’s involvement in tax fraud.

“As requested by this committee and for the purposes of demonstrating to this committee that these companies (Tatu City and Kofinaf) are involved in colossal Stamp Duty and Income Tax fraud, I have enclosed three authentic Sale and Purchase Agreements.

"The declared selling price is in land titles that I am once again providing to this committee,” he says in a sworn affidavit submitted to Parliament.

Mr Mwagiru says Tatu City and Kofinaf have been using a scheme that involves the registration of special purpose vehicles (SPVs) to which every piece of land bought is transferred at highly discounted values for purposes of defrauding the KRA of stamp duty.

The transaction begins with Tatu City or Kofinaf “creating a fake Sale and Purchase Agreement transferring land to an SPV.”

“Once the SPV has acquired the land, 99.99 per cent of its shares is transferred to a Mauritanian entity SPV.

"This new SPV is then sold to any third party buyer at a lower value attracting one per cent stamp duty as this transaction is now deemed a share transfer not a land transfer, which should ordinarily attract four per cent stamp duty,” Mr Mwagiru says.

Authentic sale

The companies (Tatu City and Kofinaf) then execute the authentic sale and purchase agreement with the buyer to facilitate the final transaction.

Mr Mwagiru gives the example of how LR No 11428, sold to Zefus Properties Limited on December 31, 2010, was executed to deny the taxman millions of shillings in stamp duty revenues.

The land was purportedly sold to the firm for Sh219,124,960, but other documents show it was worth hundreds of millions more.

The Title Deed attached shows that the same property that was three months later charged to a bank for Sh618.8 million.

“The same cycle applies to LR No 11486, which was transferred to Meteor Properties on June 12, 2013 for Sh340 million, then charged to a bank one month later for Sh1.1 billion,” the documents show.
Mr Mwagiru wants the Lands Committee to order Tatu City and Kofinaf to provide parliament with all other sale and purchase agreements for Kofinaf and Tutu City parcels for purposes of verifying the tax revenues the government has so far lost in unpaid stamp duty and income tax.

Mr Mwagiru last week appeared before the committee alongside Tatu City chairman Nahashon Nyagah, who also claimed that proceeds of land sold in Kenya was being repatriated to offshore accounts in Mauritius, Bermuda and Germany without paying taxes.

House intervention
The two are seeking parliament’s intervention to protect the interest of Kenyans in the multi-billion shilling real estate development and have the foreign directors pay necessary taxes for land sold.

The duo have accused the current Tatu City management, led by Stephen Jennings, of under-declaring valuations in order to “deny the Kenyan government of income tax.”

Mr Mwagiru said title number 11287 was alleged to have been transferred to another firm at Sh330 million when the actual value is Sh1.3 billion resulting in a Sh38 million loss in stamp duty and Sh291.7 million in income tax.

Mr Mwagiru’s documents further show that LR 248/1 &248/5 was declared as valued at Sh200 million when the actual cost stood at Sh1.17 billion.