Employer- Employee Relationship for PAYE purposes
CPA David Ndiritu Mwangi
Certified Public Accountant, Tax Agent, Tax Advisor, Tax Consultant, Business Advisor, Tax Trainer, Tax Auditor ,Tax Researcher.
KRA carried out an audit on China Road & Bridge Corporation for the period between 2014 and 2016.
On 30/06/2017, KRA tendered its investigation to CRBC. CRBC was assessed for KES 292.84m in PAYE.
On 24/07/2017, CRBC objected KES 62.94m of the amount assessed. The objected amount related to allowances paid to Policemen deployed by the GOK to guard the SGR
On 19/09/2017, KRA issued a tax decision confirming the said tax liability.
CRBC filed a notice of appeal with TAT on the grounds that; CRBC did not have a contract of employment with the Police Officers, the said officers were deployed by the GOK, CRBC does not hire or direct or control the police officers ,Payroll of the police officer is maintained by the GOK.
KRA responded that CRBC was paying the police officers directly hence the responsibility to deduct PAYE was on CRBC
In its finding, the Tribunal concluded that:
1) There existed no employer-Employee relationship between CRBC and the police officers.
2) However CRBC had a responsibility to deduct PAYE since CRBC was a paying point.
On 17/12/2019, TAT delivered a decision that KRA decision should be upheld
CRBC appealed to High Court on the ground that the employer-employee relationship is the sole basis in law for PAYE deductions as provided under?section 37(1)?of the?ITA?as underscored by the?PAYE Rules.
On 05/02/2021 the High Court set aside the TAT decision. The Court ruled that Since CRBC was not an employer, it was not under a statutory obligation to deduct and remit any tax in accordance with?section 37(1)?of the?ITA.
Coordinator Kenswed Dental Projects
2 年Great info, Thank you! What happens to an individual who has changed jobs in between a financial year and cant get their p9form from a previous employer? How should they file their returns?
I am a Certified Public Accountant of Kenya, a Member of Institute of Internal Auditors of Kenya ,A Certified Systems Auditor and a Certified KRA Tax agent.
2 年ITA has alot of weaknesses
HR outsourcing (Employer of Records (EOR) Professional Employer Organization (PEO) and Outsourced Payroll Solutions ) in Africa. Kenya, Uganda, Tanzania, Rwanda, DRC, South Africa, Nigeria and South Sudan
2 年very informative. david please inbox
Reliable Leader of Global Operations
2 年I feel the collective sigh of relief as a result of the high court ruling in so many sectors....
Finance Manager/Tax Consultant/Corporate Restructuring Expert
2 年The High Court ruling did not only set precedence but also clearly interpreted the law. If no contract of employment exists then the employer has no legal obligation to deduct PAYE.