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July 23, 2018

Tax exemption: KRA loses bid to recover Sh2bn from sugar importer

Imported sugar at a godown in Mombasa. /FILE
Imported sugar at a godown in Mombasa. /FILE

The exemption of tax for food products imported between May and August 2017 has taken a centre stage in a case pitting KRA and a sugar importer.

This emerged in Mombasa High court on Wednesday in a case where the taxman is seeking to recover Sh2 billion in tax from Darasa Investment - the sugar importer.

The importer argued that the documentation that KRA is relying on in the matter is inconsistent.

However, KRA maintained that the importation was not done within the tax exemption period.

In May 2017, Treasury Cabinet Secretary Henry Rotich issued a gazette notice exempting from tax, food products imported between May and August.

The government notice also allowed that the goods loaded on a vessel and destined for Mombasa port to also be exempted from taxation.

Read: State exempts sugar, imported milk powder from tax as food prices soar

KRA said the 40,000 metric tonnes of sugar in question never originated from Brazil.

Through lawyer Ken Ogeto, the taxman said a document by Darasa indicates the sugar was produced in August, a time they claim it has already been loaded to a vessel.

Ogeto also said the ownership of the cargo changed hands according to documents and Darasa were not the original importers.

He noted that Darasa bought the brown sugar from Multi Commerce FZC, a United Arabs Emirates based company.

But Darasa, through their lawyers Fred Ngatia, Ian Tobino, and Dennis Mosota, said the origin of the sugar is not the bone of contention.

Ngatia said the issue of whether the sugar was loaded to the vessel within stipulated time should be highly considered.

He denied allegations by KRA that the origin of the sugar was UAE and not Brazil adding that the sugar was purchased through a Kenyan bank by the importer.

The ship importing the cargo left Brazil port and was cleared by the Brazilian Chamber of Commerce in July, which was still within the stipulated tax waiver period.

Ngatia agreed that the sugar indeed went through Sharjah port for transhipment as the vessel could not berth at the Mombasa port due to its size.

This forced the vessel to go to Sharjah where it was offloaded and loaded to a smaller vessel.

Ngatia further told the court that if KRA thought the documents provided by Darasa, which included a bill of lading from Brazil, they should have confirmed with the Brazilian government.

He accused KRA of abusing their powers to mistreat Darasa adding that the decision by KRA to force his client to pay tax was irrational and pervasive.

The lawyer said Darasa was among 14 companies which were cleared by the Treasury and Agriculture ministry to have been exempted from tax.

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