KRA wins tax battle against foreign pilots

KRA headquarters at Times Towers in Nairobi. Photo/SALATON NJAU  

By GALGALLO FAYO
 

 

In Summary

• Judge rules that taxman can claim income rates on short contract perks.

Kenya Revenue Authority (KRA) can claim income tax on short contract perks.

Commercial Court Judge George Kanyi Kimondo made the ruling while dismissing an application by Everret Aviation Ltd contesting KRA’s Pay as You Earn charge on foreign pilots whom the company contracted on a temporary basis.

KRA had also levied withholding tax on resident pilots. The judge ruled that KRA should have charged PAYE on all pilots.

“The committee (of KRA) would have been entitled to find both non-resident and resident freelance pilots liable to PAYE,” said Justice Kimondo.

The dispute arose after KRA made a claim of Sh6.7 million on salaries paid to pilots by Everret between 2000 and 2002, which the company contested.

Everret argued that the pilots were not its employees, but experts sub-contracted to undertake special tasks, specifically to fly its choppers or train its staff.

The company said KRA erred when it treated the payments as salaries hence the claim. However, KRA held that there is no distinction between the company’s employees and freelance pilots.

Everret appealed to the Income Tax Local Committee which delivered its ruling in 2009. The committee reviewed the decision and directed KRA to make the claims. The company moved to court challenging the decision.