NAIROBI,Kenya July 18 -The Supreme Court has dismissed an appeal challenging tax exemptions granted to Japanese companies, consultants and employees working on major infrastructure projects in Kenya under financing agreements signed between Kenya and Japan.

📻 Breaking It Down

In a judgment delivered on Friday, a five-judge bench upheld the legality of the tax waivers, bringing to an end a legal challenge against the National Assembly, the Kenya Revenue Authority (KRA), the Attorney General and other respondents.

The exemptions stem from bilateral financing agreements entered into between 2007 and 2020, which shielded Japanese firms and personnel involved in key development projects from provisions of Kenya’s Income Tax Act.

Among the projects covered by the agreements are the Improvement of the Power Distribution System in Nakuru and Mombasa, the Dongo Kundu Special Economic Zone, the Olkaria I Unit 4 Geothermal Power Project, and the Mwea Irrigation Development Project, among others.

📌 What You Need to Know

The tax waivers were implemented through Legal Notice No. 15 of 2021, issued by the then Cabinet Secretary for the National Treasury and Economic Planning and published on February 26, 2021.

The legal notice was challenged in 2021 by petitioner Eliud Karanja Matindi, who argued that the exemptions violated Article 210(1) of the Constitution, which provides that no tax or licensing fee may be imposed, waived or varied except as authorised by legislation.

Matindi also contended that the National Assembly breached the Constitution, the Statutory Instruments Act and the Income Tax Act by approving the tax exemptions through a legal notice rather than an Act of Parliament.

After the High Court dismissed the petition, and the Court of Appeal upheld that decision, the matter proceeded to the Supreme Court.

A bench comprising Deputy Chief Justice Philomena Mwilu and Justices Njoki Ndung’u, Isaac Lenaola, William Ouko and Mohammed Ibrahim found that the process leading to the publication and implementation of the legal notice complied with the law applicable at the time the Kenya-Japan agreements were concluded.

“The agreements herein were entered into before the current Constitution and covered the period from 2007 to 2020. The former Constitution was silent on the process of treaty ratification but conferred executive powers on the President to do so,” the judges ruled.

📰 Source: Capital FM Kenya