A state corporation that contracted Italian firm CMC Di Ravenna to construct the multibillion-shilling Itare Dam in Nakuru has been ordered to pay Kenya Revenue Authority (KRA) Sh643 million taxes.
A five-member tribunal held that Central Rift Valley Water Development Agency (CRWDA) was supposed to withhold tax for management and professional fees in respect of the dam and another project in Elgeyo Marakwet known as Sabor Iten Tambach Water supply project (phase 2) which was undertaken by Belgian firm Aspen International SPRL.
“In any event, by failing to include the withholding taxes due the Appellant (CRWDA) herein fell into error,” it ruled.
The tribunal chaired by Mahat Somane also dismissed the argument by the agency that the project was exempt from withholding tax as baseless because there was no evidence the exemption was granted by Treasury.
The agency had argued that it was not responsible for the preparation of payment vouchers and as such, it would have nothing to return to KRA since it was not in control of the funds.
KRA said CRWDA was responsible for the preparation of payment certificates which were forwarded to the Water ministry for processing of payment and by failing to account for withholding tax failed to discharge its obligations as the employer of the contractor.
The agency had entered into a separate contract with CMC Di Ravenna for the execution of the Itare Dam Water supply and the Belgian company in May 2015.
KRA stated that CMC Di Ravenna was not exempt from income tax, a position confirmed by the Treasury in a value-added tax master exemption letter.
The taxman further said the services offered under the contracts for the two projects were like management and professional services as defined under the income tax act.