KIAMBU government will have to pay taxes amounting to Sh156 million to the Kenya Revenue Authority after a tribunal dismissed its appeal as invalid.
The tax appeals tribunal said the county government admitted that some of the taxes were due and paid part of the monies only to renege afterwards.
The tribunal chaired by Robert Mutuma said the county has obligations to pay the taxes in dispute once it entered into an arrangement with the taxman.
According to the tribunal, the appeal becomes invalid after failing to honour the arrangement with the KRA.
“From our understanding, the plain meaning and express import of the above provisions is that the tribunal assumes jurisdiction upon the appellant filing a valid notice of appeal. The validity of the notice of appeal, however, is expressly conditional on, amongst others, the intended appellant paying undisputed taxes or entering an arrangement or payment plan with the respondent,” the tribunal said.
Evidence tabled before the tribunal showed that KRA conducted an audit of the taxes of the county government and issued a demand of Sh612 million on April 18, 2023.
The taxes demanded were on account of pay as you earn on gratuity payments, motor vehicle benefits, secondary employees, airtime benefits and servants, as well as Withholding Income Tax and VAT.
The county government filed an objection and a review by the Commissioner of Domestic Taxes reduced the disputed amount. In the new assessment, the taxman demanded Sh319.3 million for PAYE and VAT and Sh54 million for withholding taxes.
After holding several meetings and exchanging correspondences, Kiambu county maintained that the taxes due amounted to Sh102.5 million, while KRA insisted on Sh156.2 million.
Kiambu county then went ahead and paid Sh15 million in May 2022 and another Sh12.5 million in June 2023 and promised to clear the balance in seven instalments.
The devolved unit, however, moved to the tribunal faulting KRA for claiming withholding tax of Sh156 million without any basis.
The county government further argued that the taxman was demanding for withholding taxes on transactions that do not attract withholding taxes and the commissioner of domestic taxes erred by demanding PAYE on pool cars used by the county officers in discharging official functions.
Kiambu county government also faulted the taxman over the failure to appreciate that provision of services by a county government under the fourth schedule of the constitution does not amount to a business under Section 2 and 5 of the VAT Act.
The county insisted that a levy charged to a person by a county government is already a form of tax on that person as a pre-condition to accessing the services.
For that matter,
transactions relating to medical and
laboratory equipment, non-pharmaceuticals, inter entity transfers, food
and ration, do not attract withholding taxes, county submitted.