Tribunal draws line in the sand for KRA’s VAT claims

id : 95 Litigation   
posted by : Admin
 DOQ : 2020-04-20 19:07:39

Around 2016/2017, the Kenya Revenue Authority (KRA) purportedly unearthed a fraudulent “missing traders scheme”, under which it is claimed that a number of businesses had been established to generate invoices and Electronic Tax Register (ETR) receipts that were sold to willing purchasers at a portion of the face value of the invoices/ receipts.

The purchasers would then use the invoices and ETR receipts to inflate their Cost of Sales and input Value Added Tax (VAT), thereby reduce their Corporate Tax and VAT liabilities.

In Shreeji Enterprises (K) Ltd versus Commissioner of Investigations & Enforcement at the tax appeals tribunal, the KRA submitted that Shreeji Enterprises was aware of a fraudulent scheme and had benefited from it, thereby occasioning loss of tax revenue to the Government. The KRA also alleged that the appellant had failed to provide some requested documents to prove transactions worth Sh4.8 billion, and therefore issued VAT and corporate tax assessments totalling Sh3.7 billion (VAT of Sh1 billion and corporate tax of Sh2.7 billion).

Shreeji Enterprises countered these assessments by providing acknowledgement of goods received from the 17 alleged “missing traders” (probably Goods Received Notes) together with invoices to which ETR receipts had been attached, which should have served as proof that the appellant had genuinely transacted with its suppliers.

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