VAT Not Payable To Land Transactions Whether Buildings Erected Are Residential or Commercial, Court Rules

The High Court has made a land mark ruling to exempt  Value added tax (VAT) from transaction for the sale or purchase of land whether or not the building thereon are residential or commercial buildings

“A declaration is hereby made that Value Added Tax is not payable on transaction for the sale or purchase of land whether or not the building thereon are residential or commercial buildings.” – Mary Kasango, Judge. 29th November, 2018

The declaration was made after a case was filed by David Ndengwa who bought aland that had a building that house the Standard Chartered Bank in Kiambu.

Kenya Revenue Authority (KRA) charged the purchaser 16% VAT on the purchase price. Ndeggwa was compelled to pay Sh. 11,200,008 as value added tax.

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KRA argued that the exemptions stipulated under section 8 of the VAT Act of 2013 was limited to residential and not commercial premises. They also argued that the exemption for  on land was limited ti the piece of land and not the buildings that had been erected on the piece of land.

Their lawyers submitted that sale, renting, leasing, hiring or letting of commercial buildings was subject to VAT  as it amounted to a taxable supply.

Ndegwa’s lawyers rebutted this presumption stating that Article 260 of the constitution defined land as the surface on the earth and the air space above the surface.

They sated that since the land was exempted  from VAT the buildings erected on the land were also exempt as it was impossible to sell the land without the erections

KRA was asked to refund the VAT taxed on the land as well as interest and the costs of the suit.

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