Kenya Revenue Authority (KRA) has moved to court to freeze money in three bank accounts belonging to several Chinese companies, which have allegedly been used to evade tax amounting to more than Sh1 billion in the last three financial years.
Court documents filed by the taxman allege that four of the companies were incorporated to import goods from China but there is no evidence of importation, although the said firms received money that was eventually wired to China.
The KRA wants the High Court to order the preservation of the funds held at Equity Bank, I&M Bank, and Eco Bank in the names of Hilalium & Sons (UR Home) Ltd, Weng Feng Trading Ltd, Youngchung Company Ltd, Can Feng and Riba Will Trading Ltd.
“From the pleadings by the applicant herein, is evidence that taxes amounting to Sh1,051,134,858 has been evaded on account of income tax by the interested party herein.
It is, therefore, in the wider public interest that the assessment of the taxes and recovery thereof must be secured,” the taxman said in the petition.
The KRA says investigations have revealed that between 2020-2023, the Chinese companies earned income or made sales but did not fully and correctly declare the same by filing tax returns and in the end, under-declared revenue of about Sh1 billion.
Court documents state that the companies are owned by Chinese nationals who do not have fixed homes or assets, which may be attached to recover the taxes due in case the claim is successful.
The KRA said it intends to raise and issue tax assessments to the firms for taxes that were not paid.
The investigations allegedly revealed that the other firms are subsidiaries of Hilalium & Sons (UR Home) Ltd, which were used to open several bank accounts where proceeds for sales are channelled, to evade tax.
The KRA said it recorded statements from depositors and established that those who bought goods from Hilalium & Sons were instructed to make payments to Weng Feng Trading Ltd, Riba Will Trading Company and Somba Importing and Exporting Ltd once goods are delivered.
The taxman said it also noted that the companies had a US dollar account in each of the banks but they were receiving money from shillings accounts and wired to China.
Investigations of credits by the taxman allegedly showed that individuals, business names and Hilalium & Sons deposited the sales money, mostly through M-Pesa Paybill.
“We analysed bank statements of these associated companies and established that various entities that were depositing monies into the accounts of these companies namely, Weng Feng Trading Ltd Riba Will Trading Company and Somba Importing Ltd were clients of Hilalium & Sons (UR Home) Ltd,” court documents stated.
The taxman wants the court to issue the preservation of the funds in the bank accounts as security, in case the court finds that the companies under-declared the taxes.
The documents further allege that Can Feng is a signatory of the bank accounts on behalf of the other firms.
Moses Ado said KRA believes that the firms are engaged in tax evasion after failing to declare the correct amount of income or sales for corporate and value-added tax for the period between 2020-2023.
He said KRA’s online filing system iTax shows that the firm had not correctly or fully disclosed its income and that corporate tax and VAT returns were declared less by Sh439.6 million and Sh611 million, respectively.
“That in the circumstances, it is highly likely that the interested parties may frustrate the recovery of the taxes if funds held by the respondents in the account/name of the interest party are not preserved,” Mr Ado said.
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Documents filed in court showed that Weng Feng Trading Ltd was incorporated for wholesale and retail trade and repair of motor vehicles.
The directors of the firm – Lin Lin and Cui Jingyi are described as non-filers despite working for the company as managing directors.
Riba Will Trading was incorporated in October 12, 2021, and indicated in the iTax system as a transport and storage firm.
Although the two firms claimed to have imported commodities for sale, KRA says there are no importation records into the country since they were incorporated.
