Company wins reprieve in tax row with KRA

Corporate News

 

 Taxpayers outside the KRA headquarters in Nairobi. PHOTO | FILE

By BRIAN WASUNA

In Summary

• Justice George Odunga last week ruled that the decision to tax Fontana was unlawful because the term “horticultural services” is not adequately defined in the law.

The Kenya Revenue Authority (KRA) has been stopped from collecting more than Sh122 million in taxes from a flower firm that used a Dutch company to package, market and sell its produce in the Netherlands. The taxman had argued that the services were not horticultural and Fontana Limited, the Kenyan firm, was liable for taxes.

While the value added tax law exempts horticultural services from tax, Fontana had been fighting with KRA over whether the packaging, marketing and sale of its flowers could be considered such.

Justice George Odunga last week ruled that the decision to tax Fontana was unlawful because the term “horticultural services” is not adequately defined in the law and the taxman does not have the authority to determine which of the services are exempted from tax.

“The law is clear that in cases of ambiguity in tax legislation, the same must be resolved in favour of the taxpayer and not the taxman,” said the judge.

He refuted KRA’s argument on the intention of the VAT law, arguing that the court can only determine what is clear in writing, and not what was intended by the authors