Seven Seas Technologies, a technology firm serving clients in financial services and healthcare across Kenya and Africa, has been ordered to pay the Kenya Revenue Authority (KRA) a staggering Sh900.4 million after losing a tax appeal at the Tax Appeals Tribunal.
The dispute stemmed from unpaid taxes between 2015 and 2019, covering value-added tax (VAT), pay-as-you-earn (PAYE), and withholding taxes.
Despite contesting the initial demand in 2020, Seven Seas failed to provide sufficient documentation to support their claims, ultimately leading the Tribunal to uphold KRA's assessment.
"The tribunal finds that the respondent's tax demand is due and payable," stated the Tribunal in its January 26th, 2024, ruling, effectively dismissing Seven Seas' appeal.
At the heart of the case lay concerns over missing documentation.
KRA sought invoices for outstanding transactions with third-party firms, particularly Data GRS, a South African company involved in data migration for Seven Seas' Xaba project.
Xaba, aimed at connecting blue-collar workers with employers, triggered questions about withholding tax on payments made to Data GRS.
Seven Seas argued that these payments shouldn't be subject to withholding tax, but failed to provide supporting evidence.
Additionally, their claim of double withholding on the Xaba project remained unsubstantiated.
Further discrepancies arose regarding VAT on services supposedly exported.
Seven Seas lacked proof of payment outside Kenya or details of personnel involved, including passport stamps, casting doubt on their export claims.
Finally, concerning PAYE, Seven Seas attempted to justify director fees of Sh24 million for 2014 and 2015 as reimbursements made by directors using personal funds to pay employees.
However, the absence of bank statements demonstrating these transactions and the lack of evidence that directors did not benefit led the Tribunal to rule against them.
This verdict serves as a reminder for companies to maintain meticulous records and adhere to tax regulations.
Seven Seas' failure to do so resulted in a hefty financial penalty, highlighting the importance of transparency and cooperation with tax authorities.