PKA Consultants

30/01/2024

30/01/2024

Woow Wonderful experience it is

22/03/2023

FORBES Article on 5 Danger Signs That Complacency Will Derail Your Career

It’s wonderful to feel fulfilled at work, comfortable with your colleagues, your boss, and the company. If you truly enjoy your work why would you even consider pushing yourself out of your comfort zone?

Dictionary.com’s definition of complacency is “a feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like; self-satisfaction or smug satisfaction with an existing situation, condition, etc.”

Here are five signs that your complacency can derail you.

1. You are no longer striving to do your best.

In this highly competitive job market, there are many people who would love your job. If you have been doing just enough to get by, beware. You must continue to add value and meet and exceed expectations to keep your job.

2. You are not staying up to date in your field and industry.

When was the last time you took a course or attended an industry conference? Do you regularly read trade magazines, ezines, and journals? It is easy to lose your credibility overnight. The next new hire on your team can show up with excellent credentials and want your job.

3. You are not seeking or taking advantage of new opportunities.

If you don’t seek or take advantage of opportunities your skills become stale.

Look for opportunities to work on new projects and maintain your credibility, expand your skill set, and increase your exposure across the company.

4. You are not maintaining or building your network of business contacts.

If you don't build relationships at work and stay tuned to what's happening or about to happen, you won't be privy to critical information that can influence your position.

You don’t need to be searching for a new job to build a network of business contacts. Make it your intention to stay connected to former colleagues and clients. This helps you to find new opportunities should you need to.

5. You don’t risk sharing your opinion or ideas.

Fear of upsetting the status quo or potentially disagreeing with your boss or colleagues can hold you back from speaking up. If you don’t take the risk to voice your opinion, people assume you have none.

28/01/2023

Just saying.... If your past is glorious than your present, then you are not doing much at the present.

03/11/2022

Can KRA Reopen a closed tax audit issue?
CASE STUDY:MAHAN LIMITED VS KRA

In the year 2016, ML created a special purpose vehicle to construct five (5) town houses. In this regard, ML entered into a joint agreement with Green Papyrus Company. The project was executed 'and both companies jointly disposed off one (1) unit and shared the proceeds equally.

ML was unable to sell the remaining two (2) units on its own even after contracting real estate agents to help sell the units. Faced with financial constraints, ML entered into another agreement where they agreed to dispose off the remaining two units to Green Papyrus Limited for a consideration of Kshs. 105,000,000.00 equivalent to their shareholding in A to Z Green Papyrus Company; qualifying the transaction as a capital gain and Capital Gains Tax of Kshs. 581,637.00 was duly paid in 2017. The cost for the two units was Kshs. 93,367,260 and the resultant capital gain amounted to Kshs. 11,632,740.00

On 5th October 2018, KRA issued ML with an additional assessment amounting to a VAT liability of Kshs.15,589,950.88 pertaining to the month of December 2016 .

ML objected

An objection decision was issued on 20th December 2018 and with ML agreeing to the reviewed tax amount of Kshs. 351,370.00 that was paid on its part ,

ML received a new amended tax notice on 30th June 2021 over the same subject matter that had been finalized and appealed

The renewed tax notice ended up at the TAT.

ML averred that:

KRA had previously audited and issued a private ruling on the matter on which it subsequently raised the additional arbitrary assessment. ML stated that this is procedurally unfair, unjust, in bad faith, malicious and amounts to violation of the Appellant's right to fair administrative action and legitimate expectation as protected under Article 47 of the Constitution of Kenya and the Fair Administrative Actions Act No. 4 of 2015 (FAA Act).
Sections 65 & 68 of the TPA creates a statutory legitimate expectation that the private ruling of KRA is binding on it, and it cannot renege on it after ML has relied on it, as is the case herein.
Section 68 of the TPA sets a mandatory procedure that private ruling can only be withdrawn in writing and with reasonable cause, and thus the private ruling dated 20th December is binding on KRA and it had never been withdrawn in writing and with reasons for the same.
The imposition of VAT on a transaction that purely attracts Capital Gains Tax is unjust, procedurally unfair, unreasonable and in violation of ML's right to fair administrative action and legitimate expectation.
KRA Responded that:

ML's turnover declared in the VAT returns compared with its turnover declared in its Income Tax returns indicated there was a variance of an amount of Kshs. 97,437,193.00 incurred in the year 2016 which is VAT chargeable.
KRA reviewed ML's objection on the assessment and issued its objection decision informing ML that its objection was not supported by any relevant documents.
ML failed to provide proof of purchases or costs hence the input claim could not be allowed. Pursuant to Section 56 of the TPA the onus is on ML to prove the said expenditure
Section 59 of the TPA empowers KRA to require the production of documents and information to enable him ascertain a tax liability of a person. Such documents include invoices, copies of stock records, details of each supply of goods and services among others. ML was unable to provide these documents despite that the burden proof being on them.
In its ruling 09/09/2022,the Tax Appeal Tribunal observed that:

For the first assessment of the same tax period, December 2016, that is the subject of the current appeal, KRA closed off the matter and issued a tax decision based on an audit that it undertook. Therefore there must have been sufficient documentation provided by ML and reviewed by KRA in arriving at its initial final decision dated 20th December 2018
KRA's actions, inclosing this matter in 2018 in the manner that it did, created a legitimate expectation which ML relied on in establishing that any tax issue relating to the tax period December 2016 was fully audited and settled. In this regard, the Tribunal also confirmed from the pleadings that ML settled the taxes demanded by KRA in its 2018 objection decision without further ado
The payment of the taxes determined by KRA in the objection decision issued on 20th December,2018following an audit, created a legitimate expectation on the part of ML that it will not be called upon again to answer to any tax assessment in respect of the same tax period.
As such ML won the case

CPA David Ndiritu Mwangi

13/10/2022

Let us look at some of the cases determined by KRA that may affect us in business in coming days....

Case Study: KRA VS Muga Developers Limited

KRA conducted a review of MDL tax affairs to ascertain its compliance status for the income period 2015 to 2017. KRA communicated its review findings in a letter dated 4th September 2018 where it stated that MDL had not filed tax returns for the subject period contrary to section 24(1) of the Tax Procedures Act (“TPA”). Further, that from the information available to KRA, MDL developed the Project in partnership with Suraya Property Group Limited (“Suraya”) which was in three phases; Phase one and two comprising 756 units of which 695 units were sold as complete houses while phase three had ongoing off-plan sales. KRA took the view that income arising from the sale of the units was not declared for tax purposes and that MDL had not filed income tax returns for the subject period thus had not declared the income and tax from the Project. KRA assessed tax for the period at KES 2,915,192,263.0

KRA urged MDL to file all the corporation tax returns within 14 days of that letter, failure to which KRA would issue MDL with a default assessment in accordance with the provisions of section 29(1) of the TPA. MDL filed original corporation tax returns on 20th and 21st September 2018 and KRA reviewed those returns together with one filed on 28th October 2015.

KRA in a letter dated 28th September communicated its findings on the returns in respect of the years of income 2014-2017. It maintained that MDL was a Special Purpose Vehicle incorporated by Suraya for the development of the Project and that Phases one and two of the Project which comprised of 756 units were sold as complete whereas Phase three comprised of 152 units which were sold off-plan. KRA held that from the returns, MDL had under declared its gross turnovers and fell short of complete disclosure and as such brought to charge the gross revenue variances.

KRA also noted that MDL had erroneously carried forward the taxable loss of KES 1,845,781,896.00 into the year of income 2017 instead of KES 1,439,780,437.00 expected from the year of income 2016. Thus, the tax computational variance of KES 406,001,459.00 in respect of the overstated taxable loss in 2017 was corrected and accordingly brought to charge.

KRA revised the tax computations for the subject income years and determined the total additional principal tax payable by MDL as KES 3,553,263,459.00 and consequently issued additional assessments

MDL wrote to KRA on 26th October 2018 stating that its returns had been filed using draft accounts which had not been completed and signed off and that they had attached the final audited accounts for KRA’s analysis and corrections as may be necessary.

MDL further explained and sought to clarify that the turnover expected on the booked units of the Project was a cumulative figure that depicted the anticipated revenue from the Project while the revenue recognized for the year were the actual sales/income for the period and that the final accounts would be clearer on this.

MDL was requested to furnish KRA with records, documents and reconciliations/ computations which should include but not limited to all the tax computations for the years of income 2014-2017, all Trial Balances (in soft copies) in respect of the Management and Final accounts for all the years of income under review, all the Gross Revenue Accounts, Debtors Accounts and Creditors Accounts Ledgers (in soft copies) for the years under review, all the Cash Books (Cash & Bank in soft copies) for the years under review, all Revenue Recognition Accounts (in soft copies) for the years under review and any other records, documents, accounts and reconciliations deemed necessary.

Upon assessment, MDL objected.

KRA issued an objection decision

In its decision, KRA stated that MDL had not produced most of the documents as requested by KRA. The documents included; Copies of sale agreements, shareholder loans agreement, All bank loan agreements and bank statements to confirm loan interest for the years 2014 to 2017, all records relating to sale of land to CFL Limited and any other records, documents, accounts and reconciliations deemed necessary in line with the review

KRA confirmed that as of the date of the Objection Decision, it had only received the tax computations for years of income 2014 to 2017 but that a review of the profit/(loss) for the years of income 2015, 2016 and 2017 as per the tax computation on the iTax return compared with the signed audited accounts provided revealed a variance between the two. It also received the breakdown of sales per customers, sale contract numbers and sales amounts for the years 2015 to 2017 but that this was not sufficient in the absence of sales agreements and other records requested therewith

As Such KRA confirmed the assessment

MDL appealed to the TAT.

In it decision the TAT held that:

· KRA issued the additional assessments on the basis of MDL’s draft financial statements and that the values which KRA had treated as sales revenue on the sold units were projected values at the end of the respective accounting periods and therefore, the additional assessments were issued on an incorrect basis and were excessive

· KRA confirmed to have received sale agreements that had sale prices per unit which the Tribunal expected KRA to calculate the estimated annual sales values in arriving at the additional assessments.

· Alternatively, to the test of reasonableness of the additional assessments, KRA should have used industry figures from a review of the tax compliance status of the said top fifteen real estate developers which according to the Tribunal, would have been considered more appropriate.

· On whether it was appropriate to receive bank statements from Suraya when KRA requested for bank statements from MDL, the Tribunal found no fault in this and held that it was a practice and not uncommon in the real estate industry for using an agent for cash receipts as long as the cash is accounted for correctly and that the MDL’s audited financial statements for 2014 to 2017 did not suggest an anomaly in this respect.

As such TAT found KRA assessment erroneous

KRA appealed to the High Court

In its decision on 19/05/2022, The High Court observed That:

· Section 59(1) of the TPA empowers KRA to require a taxpayer to produce for examination at such time and place as may be specified in a notice, any documents (including in electronic format) that are in the taxpayer's custody or under its control relating to the tax liability of that taxpayer and further require the taxpayer to furnish information relating to the tax liability of the taxpayer.

· Under section 24(1) of the TPA, a tax payer is required to submit a tax return under a tax law in a manner approved by KRA, in this case itax, however, section 24(2) of the TPA provides that KRA shall not be bound by such a tax return or information provided by, or on behalf of, a taxpayer and KRA may assess a taxpayer's tax liability using any information available to KRA

· Once KRA made the additional assessments based on the returns filed by MDL, then it was incumbent on MDL to disprove KRA.

· From the parties’ correspondence, more so the Objection Decision, it is clear MDL never furnished KRA with all the documents requested and it is on this basis that KRA reaffirmed its earlier position on the additional assessments.

· While it is true KRA admitted that it received sale agreements for the units that had a sale price, MDL still did not provide all the documents requested by KRA and the furnishing of these sale agreements did not in any way mean that MDL was now excluded from furnishing the other listed documents or that it had sufficiently discharged the burden of proof.

· MDL, in failing to provide its bank statements to enable KRA verify that the bank deposits tallied with the sale agreement values failed to discharge the burden of proof. It could not then fault for KRA for using the documents and information available to it, including MDL’s own projected sales in its audited accounts and details of units sold to determine the gross income of MDL.

· The Tribunal misapprehended the facts and evidence on record and the applicable law to a point that they arrived at an erroneous decision

As such KRA Won

However, KRA had in its submissions and in its Memorandum of Appeal agreed to give MDL a window to provide the documents requested in its earlier correspondences to ascertain the correctness of the additional assessments

The Court therefore granted MDL (60) days from the date of this judgment to furnish KRA with all the documentation and information requested by KRA in its letter dated 21st November 2018 failure to which the said additional assessments confirmed on 24th January 2019 would be upheld.

19/08/2022

06/10/2021

It can be done,keep the faith

23/09/2021

“We must lead ourselves first, and how well we do that will impact how well we can embolden others to take the courageous actions that their fears would rather they didn’t take,” says Warrell.

“With so much outside our control, we have to double down on focusing on what lays within it...