Leading Kenyan university sued for Sh411 million tax evasion scandal

The university has been sued for failing to pay VAT on the sale of a multi-billion building.

The Sh1.86 billion sale of Nairobi’s ICEA building now hangs on the line following a massive tax scandal that has rocked its main tenant, Jomo Kenyatta University of Agriculture and Technology (JKUAT).

The building owners, ICEA Lion Life Assurance Company, has now sued the university for failing to pay value added tax (VAT) on the transaction, which has seen the tax bill accumulate to Sh411 million.

JKUAT acquired the building to expand its programmes and accommodate its growing student population. The sale agreement was signed in July 2015 and the two parties took three months to complete most obligations to allow JKUAT take possession of the prime property.

The outstanding tax attracts penalties and interest of 20 per cent and one per cent respectively each passing month.

"The property was duly transferred and registered in the name of JKUAT on October 1, 2015. JKUAT has acknowledged that it was required to pay VAT on the purchase price but has despite demands refused to pay.

"The VAT continues to attract penalties and interest and ICEA may be held liable unless JKUAT pays the amount due,” ICEA CEO Justus Mutiga says in court filings.

ICEA now fears that the taxman could turn his guns on the underwriter to recover the tax due.

JKUAT on its hand has written to the taxman and treasury seeking a tax waiver though ICEA claims that the university after admitting to requesting for a waiver later denied being aware of any payable VAT amounts.

The ICEA building stands on 0.674 acres on Kenyatta Avenue and has a gross lettable area of 163,724 square feet and 113 car parking bays.

Among its other current tenants include electronics giant Samsung, the National Bank of Kenya, Computer Pride Ltd and Acacia Medical Centre Ltd.

The court has granted each party 14 days to respond to the suit papers, and ordered that the application filed by either party be heard simultaneously on July 14.

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