Trading firm loses bid to block Sh188m tax claim

The Kenya Revenue Authority has won a suit against trading firm Jarinta (K) Limited which had failed to pay VAT and corporate tax amounting to Sh188.3 million.

The Commissioner of Investigation and Enforcement assessed the VAT and corporation tax of the importing company at that amount in May 2018. Jarinta filed a notice of objection the following month but KRA confirmed the assessment in July 2018.

Aggrieved by this assessment Jarinta filed an appeal with the Tax Appeals Tribunal, which upheld the assessment by the Taxman to be right. This prompted the company to file a suit at the High Court against KRA.

In dismissing the suit, Justice Alfred Mabeya said Jarinta could have discharged its burden of proof only if it produced documents that showed that the purchases had been made.

“Having failed to produce evidence to show that the transactions took place, this Court agrees with the decision of the Tribunal that the appellant’s claim was not merited. Accordingly, I find that the appeal has no merit and hereby dismiss the same with costs to the respondent.”

KRA told the court that in January 2017, it got wind of information that there were unscrupulous traders that were engaging in a missing trader scheme.

Missing trader scheme facilitates tax fraud in that fake invoices are created and the invoices are produced before the Tax man without having any taxable supply.

The missing trader would enable taxpayers to reduce the VAT liability by claiming input tax from the traders.

The appellant submitted that it purchased goods from its suppliers and that it had produced evidence for the purchase.

The court was told that while carrying out investigations, KRA observed that Jarinta had claimed purchases from traders whom the taxman suspected were not trading.

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