Taxman loses bid to collect Sh2bn arrears from NSSF

NSSF argued that KRA had no power to withdraw tax exemption status but could only impose penalties. PHOTO | FILE 

By BRIAN WASUNA

The taxman has lost its bid to collect Sh2.1 billion from the National Social Security Fund (NSSF) for tax arrears allegedly accumulated between 2004 and 2006.

High Court judge Fred Ochieng has stopped the Kenya Revenue Authority from demanding the colossal sum, arguing that the taxman failed to prove that the NSSF intentionally failed to abide by conditions that would allow it to benefit from a number of reliefs.

The Sh2.1 billion is equivalent to 53 per cent of the Sh3.9 billion that NSSF paid retirees last year, highlighting the magnitude of the payout.

Among the conditions NSSF was to meet to enjoy some exemptions was the advertisement of its audited books for every financial year, declaration of all assets and allocation of surplus funds to members’ accounts.

The NSSF was also to carry out a valuation of all its assets.

KRA claimed that NSSF withdrew from the tax exemptions by failing to carry out a valuation of all its assets. But the fund manager held that the law exempts it from paying income tax regardless of whether it complied with the assets valuation rule or not.

“There is a world of difference between an assertion and proof. That which a party states to be his case is an assertion. The party needs to adduce evidence to support his said assertion with a view to proving his case. I have carefully perused the record provided but did not find any proof,” Justice Ochieng said in his ruling.

The KRA moved to the High Court after the Nairobi Local Committee found that the social security fund had not broken any of the taxman’s conditions for exemptions.

NSSF had claimed in its petition that in any event, it would only be liable to a Sh10,000 fine for alleged non-compliance with the conditions, and that the KRA was wrong in trying to demand Sh2.1 billion.

It further argued that KRA has no power to withdraw NSSF tax exemption status, claiming that the tax man can only impose penalties.