NAIROBI: The Government will pay the taxes incurred by suppliers in the Sh327 billion Standard Gauge Railway ( SGR) project.
The National Treasury and Kenya Revenue Authority ( KRA) said they have agreed on a framework to ensure that the project complies with the country’s tax laws.
In a sensitisation programme organised by the two Government agencies Wednesday, different players in the project, including local suppliers, were briefed on the framework and what was required of them to be allowed to supply to the project.
Speaking at the event, KRA’s Commissioner General John Njiraini said the burden of Value Added Tax (VAT) and other levies charged on purchases for the project would now fall on the Government rather than the contractor, China Roads and Bridges Corporation (CRBC).
“This arrangement will allow project implementation to proceed smoothly within the existing legal confines while also removing the risk of non-compliance with VAT requirements from SGR suppliers,” he said.
Mr Njiraini said KRA only the 124 companies on the pre-qualified list of suppliers to the project would benefit in order to ensure proper monitoring and accounting of the taxes due.
“The list will be updated from time to time but with the need to keep the numbers at manageable levels in mind,” Mr Njiraini said.
ZERO RATED SUPPLIES
Pancrasius Nyaga a commissioner in KRA’s Domestic Taxes Department, said that there were no duty exempt or zero-rated supplies for the SGR project.
“Suppliers will be charging VAT to the contractor, but the contractor will not be making payment on that VAT. So how will the suppliers comply with the VAT laws in terms of making their declaration to KRA if they have not collected VAT from the contractor This is where the National Treasury comes in and says it will pay that particular VAT,” Mr Nyaga explained.
He added that the suppliers will make their declarations to KRA in the normal way for any VAT they are supposed to pay, and which pertains to the project.
“They will later be issued with invoices in regards to the supplies made to the project and forward them to us to be vetted and once established that they are in regards to the project, the necessary steps will be taken to ensure they recover that VAT,” he further explained.