Graphic Lineups argue that the National Treasury had undertaken to pay the VAT on their behalf.
A printing firm must pay Sh15.7 million in VAT on an imported press after a tax tribunal ruled that a government undertaking to settle the bill did not relieve it of its tax obligation.
The Tax Appeals Tribunal rejected Graphic Lineups Limited’s argument that the Kenya Revenue Authority (KRA) had retrospectively applied changes to the Value Added Tax Act.
The tribunal said the decisive date was when the machinery entered Kenya, not when the importation process began.
Graphic Lineups argued that importation of its HP Indigo Digital Offset Press 12000 began before April 25, 2020, when plant and machinery used to manufacture goods were exempt from VAT.
Documents showed the process began on January 30, 2020. They included an invoice, Import Declaration Form, Pre-Verification of Conformity document and Bill of Lading issued before April 25.
The tribunal accepted that the documents showed the importation process had started before the law changed. However, it noted that the Single Administrative Document, which could have established when the goods entered Kenya, was missing.
Clients seeking services at KRA headquarters, Times Tower, Nairobi.
Exemption application
“Based on the foregoing, what counts is the time of entry of goods not when importation commenced,” the tribunal said.
The Tax Laws (Amendment) Act 2020 took effect on April 25, 2020, removing the VAT exemption for imported plant and machinery.
Graphic Lineups argued that the National Treasury had undertaken to pay the VAT and instructed KRA to release the machine without payment.
The undertaking followed an exemption application sent to Treasury by the Ministry of Industrialisation, Trade and Enterprise Development in June 2020. Treasury wrote to KRA on July 13, undertaking to settle the Sh15,726,451 VAT. The tribunal said the undertaking did not extinguish the company’s statutory tax obligation.
“The Tribunal is of the view that it is the Taxpayer that has a statutory duty to pay tax, not the National Treasury,” it ruled.
It added that where Treasury undertakes to pay tax on a taxpayer’s behalf, the taxpayer remains responsible for ensuring it is honoured.
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