Can a wrongful PIN registration change the legal status of a business.

A few days ago I came across a sole proprietor (business name) with a company PIN. I had come across a partnership business with a Company PIN early last year. The two cases are among the many cases of wrongful registration of taxpayers. In my view, the taxman needs to train his new employees on the legal structure of business in Kenya. This is to forestall loss of revenue in case of tax disputes

I have read an interesting case between KRA and Tetu Beverage Company. The business had been registered as a partnership of two people in the year 1995, however one partner resigned in the year 2001.The business continued operating under the same name.

The business also continued to use the partnership PIN until 2008 when the proprietor applied to be issued with another PIN since the banks had rejected processing VAT payments under the partnership PIN

The business PIN was issued as a company. However the proprietor did not realize that the issuance of a new PIN had changed the legal status of the business from a partnership to a company. He continued filing VAT under companies PIN

In the year 2018, Tetu Beverage Company, was reviewed by KRA as non-filer for income tax purposes. This was for year 2014-2017.KRA raised an assessment of KES 317.7m VAT and KES 118M income tax.

Upon unsuccessful objection, Tetu Beverage appealed to TAT.

Tetu Bevearge argued that as per the registration documents, Tetu Beverage Company Limited did not exist. Tetu Beverage company had issued proper documents to KRA .It was KRA'S mistake in registering the business as a Company.

Tetu Beverage also submitted that it had paid all due taxes under the proprietors individual PIN as required by the law.

In its decision on dated 21/05/2021, the tribunal observed that:

· Tetu Beverage was not a corporate body and therefore KRA erred by assessing tax under company PIN

· Tetu Beverage Company Limited was a non-existent body

· The proprietor had already paid tax under his individual PIN.

· No other entity could be assessed for tax except the proprietor.

As such Tetu Beverage Won the case.