Suraya Property Group has lost the KShs. 3.5 billion tax-dispute to KRA, with a Court order to surrender documents regarding the sale of Fourways Junction to the taxman within two months.

Justice David Majanja ordered Muga Developers- the owners of Suraya property to table the documents within the set days, failure to which KRA will demand the billions in taxes due. The documents were of the construction of some 756 housing units known as Fourways Junction, off Kiambu Road.

At least 695 units of the estate were completed and sold, out of the 756 which had been built. Each of the units were sold at KShs. 30 million.

“From the parties’ correspondence, more so the Objection Decision, it is clear the Respondent (Muga Developers) never furnished the Commissioner with all the documents requested and it is on this basis that the Commissioner reaffirmed its earlier position on the additional assessments,” the judge said.

KRA’s Commissioner made an assessment of the tax owed to KRA by Suraya and determined that it would be KShs. 35 billion. The court reported that it was upon the taxpayer – Suraya to prove that the assessment made by KRA was excessive or incorrect. The developer had provided 330 sale agreements as opposed to the expected 695 agreements for the sold units.

The Justice was quoted saying, “Once the Commissioner made the additional assessments based on the returns filed by the respondent, then it was incumbent on the respondent to disprove the Commissioner.”

KRA’s assessment revealed that the developer didn’t declare income from the unit sales, under-declared gross turnover, and failed to file corporate income tax returns for the period 2014 to 2017.

During the assessment by KRA, the developer was allowed to file the returns, and based on the tax returns filed, KRA noticed an additional tax amounting to KShs. 2.9 billion.

Suraya rejected the additional assessment by KRA and was to provide further details such as tax records, all the tax computations and trial balances as well as final accounts.

KRA further demanded; gross revenue accounts, debtors accounts and creditors accounts ledgers, all the cash books, all revenue recognition accounts, and any other important records, documents, accounts, and reconciliations.

Upon referring the matter to the tax appeals tribunal, the tribunal ruled that KRA should have used industry figures from a review of the tax compliance status of the said top fifteen real estate developers. Suraya also argued that as a principal shareholder, he was bankrupt and was experiencing financial challenges from heavy indebtedness to Equity Bank Limited. The developer argued out that all monies received between 2014 and 2018, went into a joint account controlled by the lender.

Nonetheless, Justice Majanja overturned the tax tribunal’s decision, with a final ruling that the developer failed to argue out the case according to KRA’s assessments. The developer was expected to disprove KRA.

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