The contractor of the Standard Gauge Railway (SGR) has sued Kenya Revenue Authority (KRA) over tax on allowances paid to police officers who were manning the project during construction.
In a case filed in the High Court, China Road and Bridge Corporation (CRBC) dismissed KRA’s Ksh64 million tax demand terming it illegal.
According to the company, the agreement between it and Kenya was that it would build the SGR while the Government offers security.
CRBC told the court that the security officers were not its employees and therefore the money paid to the them as allowances ought to be deducted from National Police Service Commission (NPC).
“The police officers are not employees of the appellant (CRBC) as such, the National Police Service should bear the responsibility of the deduced Pay As You Earn (PAYE),” the Chinese firm stated.
“The appellant contends that there are no contractual services between itself and the police officers by the virtue of the fact that the appellant did not determine the work by the police officers and they were not answerable to the appellant,” CRBC lawyer Prof Albert Mumma stated.
However, KRA dismissed the argument stating that it was the responsibility of CRBC to deduct the taxes and remit the same.
The taxman claimed that the Chinese contractor was an employer on account of the services rendered by the police.
KRA had conducted investigations into CRBC tax payments between 2014 to 2016.
On June 30, 2017, KRA wrote to the Chinese firm after reviewing its tax records demanding that the contractor to pay 20 per cent tax on cash allowances paid to the police, the amount was totaling to Ksh44 million.
The amount further attracted Ksh11 million penalty and Ksh9 million interest after the company failed to pay.
According to KRA’s letter attached to court documents, CRBC owed it a total of Ksh3 billion net principal tax which the company’s boss Li Qiang has objected to pay.