The Kenya Revenue Authority (KRA) has been allowed to demand Ksh643 million tax after Tax Appeal Tribunal dismissed an appeal filed by Central Rift Valley Water Development Agency to challenge an assessment of withholding tax amounting to Ksh643,394,426.

The assessment is based on the failure by the agency to deduct taxes when it was paying CMC Di Ravenna, an Italian company contracted to undertake the Itare Dam Water Supply Project and Aspen International SPRL of Belgium that was contracted to undertake the Sabor Iten Tambach Water Supply Project.

KRA’s case was that the two foreign companies were not exempt from Income Tax in Kenya and the services offered in the project were in the nature of management and professional services that are subject to Withholding Tax under the Income Tax Act.

The case by Central Rift Valley Water Development Agency was that it was not responsible for making payments to the two foreign companies but was just an implementing entity that was inspecting the works and preparing interim payment certificates.

The Tribunal found that the two foreign companies were not exempt from Income Tax and that the Agency ought to have included the amount to be withheld in the payment certificates it prepared but failed to do so.

Further, the Tribunal held that KRA was right in demanding the assessed taxes of Ksh643,394,426 and dismissed the Appeal.