An Italian construction company is contesting a Sh333 million tax demand from the Kenya Revenue Authority (KRA) related to its work on the Itare water supply project in Nakuru County.
CMC Di Ravenna, which signed a Sh28.9 billion contract with the Rift Valley Water Services Board in May 2015, filed a court application on March 20 seeking to overturn the tax assessment and reclaim Sh166 million in alleged overpayments. The dispute centers on conflicting interpretations of VAT obligations for the aid-funded dam project.
In 2016, KRA issued a private ruling stating that supplies to the project were zero-rated for VAT, a position reaffirmed in a subsequent 2018 directive. However, the company claims KRA later reversed this stance without proper notice, leading to a tax demand in May 2018. CMC Di Ravenna argues the agency violated procedural rules by failing to inform them of the ruling's withdrawal, as required under the Tax Procedures Act.
KRA maintains the case is already under review by the Tax Appeals Tribunal and warns that pursuing litigation in the High Court constitutes an abuse of process. The tax authority also alleges the firm concealed a Treasury exemption letter and improperly taxed fuel sales to subcontractors.
The project, funded by Italian banks as official development assistance, faced additional tax assessments of Sh923 million following an audit of 2016-2017 financial records. A 2018 court ruling allowed the company to challenge the tax demand, but KRA insists the matter remains sub judice.
