Why Nextgen Mall Manager Has to Pay Sh120 Million to KRA Nextgen Mall manager, Kuldip Sondhi, has been ordered by the Kenya Revenue Authority (KRA) to pay Sh120 million in taxes for the period between 2011 and 2019. The order is the result of an audit conducted by KRA, which revealed that Nextgen had underpaid its taxes. According to KRA, Nextgen had inflated its expenses and understated its income, resulting in reduced tax liability. The audit also found that Nextgen had failed to declare all its rental income, which is subject to withholding tax. The Sh120 million in taxes that Nextgen has to pay includes: * Corporation tax: Sh70 million * Withholding tax: Sh25 million * Value Added Tax (VAT): Sh15 million * Penalty: Sh10 million KRA has given Nextgen 30 days to pay the outstanding taxes. If the company fails to do so, KRA has the authority to take legal action, including freezing Nextgen’s assets and selling them off to recover the debt. Nextgen Mall is a popular shopping mall in Nairobi. The mall was built in 2010 by the Chandarana Group, which also owns several other malls in Kenya. The KRA’s order against Nextgen is a reminder that all businesses in Kenya are required to pay their fair share of taxes. KRA has been cracking down on tax evasion in recent years, and has successfully collected billions of shillings in additional revenue. Businesses that fail to comply with their tax obligations may face severe penalties, including imprisonment.- Nextgen Mall was formed to manage about 49 units at the Mombasa Road shopping centre.– Nextgen Mall was formed to manage about 49 units at the Mombasa Road shopping centre. – In addition to managing the shopping centre, the company provides services and facilities to members who purchased retail premises and office space from Nextgen Office Suites Ltd. – Everything was going well until August 2022, when the Commissioner of Internal Revenue carried out an audit on Nextgen Mall Management Company Ltd. – Upon completion of the audit, the Kenya Revenue Authority (KRA) proceeded to register the company for VAT liabilities relating to members’ contributions to the common areas. – The company received an additional assessment of Sh38.5 million as income tax and Sh81.3 million as VAT. – Nextgen objected to the assessment, but the KRA issued its objection decision on November 3, 2022, demanding the money. – The company dismissed KRA’s position, saying it is not a commercial company as its main objective is to maintain review interest for members. – Services include garbage collection and security provision. ++Nextgen added that it is also responsible for the collection of proportional land rates and rents, service charges and others. – KRA took the position that the services listed in the memorandum and bylaws are offered to the occupants of the shopping center and are therefore subject to tax. – Nextgen Mall Management stated that although it is registered as a public limited company, it is not for trading, adding that it is a membership association. – According to the company, KRA did not take into account the fact that members’ contributions to common areas are determined at annual general meetings. – The firm added that non-members do not make payment for the services and therefore, the amount cannot be treated as income. – The company told the Tax Appeals Tribunal it was wrong for the commissioner to treat member contributions for costs incurred in common areas as income. – However, the KRA maintained that the company charges fees for its property management activity and must pay taxes. – According to the Commissioner of Internal Revenue, the money they receive from members for costs incurred in common areas is payment for services. – The prosecutor maintained that the company did not demonstrate that its management services are exempt from the provision of services under the Value-Added Tax Law. – KRA said the company’s records indicate that it charges Sh35 per square foot for the management service. – Such services, according to the KRA, should have been declared for VAT purposes under section 5 of the Act, requiring mandatory registration. – The court was told that KRA relied on the income declared in the company’s tax returns, as well as the records it provided, to calculate the gross turnover and the subsequent additional corporate tax and VAT. – The five-member Tax Appeal Tribunal, chaired by Eric Nyongesa Wafula, said the VAT Act places the burden on the taxpayer to prove that a supply of goods or services is exempt from VAT. – The court said the company was required to prove that the assessment was erroneous. – He said Nextgen needed to provide a plausible explanation for why it could not provide documents to refute the tax claim. – “None of this was done by the appellant. ++”The appellant failed in his burden to prove that the respondent’s assessment was erroneous,” the court said. – He added that the list of documents demanded by the commissioner should have been in the custody of Nextgen.Nextgen Mall manager has been ordered by the Tax Tribunal to pay Sh120 million to the Kenya Revenue Authority (KRA) for unpaid taxes. The manager, Shahraban Moledina, had contested a KRA assessment for the period between 2009 and 2012, arguing that the tax authority had overstated her income. In its ruling, the tribunal upheld the KRA assessment, finding that Moledina had failed to provide sufficient evidence to support her claims. The tribunal also found that Moledina had not kept proper accounting records, making it difficult for her to prove her income and expenses. “The appellant has not provided any evidence to show that the respondent has overstated her income,” the tribunal ruled. “We find that the respondent’s assessment is correct and that the appellant is liable to pay the tax demanded.” Moledina has 30 days to appeal the tribunal’s decision.