INTERNAL

ISO 9001:2015 CERTIFIED

INTELLIGENCE, STRATEGIC OPERATIONS, INVESTIGATIONS &

ENFORCEMENT DEPARTMENT
MEMO

TO: Commissioner- Intelligence, Strategic Operations, Investigations &

Enforcement

Attn :

FROM: Ag Deputy Commissioner- Intelligence, Strategic Operations,

Investigations & Enforcement

DATE: 4th July, 2023

REF: I&E/NBI(B)/DTIS/954/023

RE: ADVICE ON PROSECUTIION RECOMMENDATIONS ON NGOLU

HOLDINGS LIMITED AND DETILAND COMPANY LIMITED.

BACKGROUND
1.1 Detiland Company Limited was incorporated on 21/06/2018 under
registration number PVT-MKU3YV3. It is involved in real estate
development for residential houses in Kileleshwa area, Nairobi County.
The company carried out a project under the name Diamond Homes in
the heart of Kileleshwa, Othaya Road. It has three (3) directors,
namely; Kaiwu Deng- A009548776V, Jian Hua- A012123871I, and Hui
Wen- A01207171257D.
1.2 The company started Construction in 2019 and completed the project
in 2022 through self-construction. The residential apartment
constitutes of 224 units, which include; 56 (studio units) measuring 45
SQM, 84 92-bedroom units) measuring 100 SQM, 56 (3-bedroom
units) measuring 120 SQM, 14 (3-bedroom units) measuring 130 SQM
and 14 (3-bedroom units) measuring 140SQM. As at 2022 year-end,
the taxpayer had sold off all units. KRA gathered that the costs had
been expensed but were not wholly and exclusively incurred in the
production of the income.
1.3 The case began when the KRA received open source intelligence that
the taxpayer had received income from sale of houses but had not
declared the full amounts. Vide a memo dated 16th January 2023 the
Commissioner ISO I&E was informed of tax investigation of Detiland
Company Limited.
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ISO 9001:2015 CERTIFIED

1.4 On the other hand Ngolu Holdings Company Limited is a property
developer dealing in the buying and selling of properties and as such
exempted from CGT.

2.0 INVESTIGATION OBJECTIVES

 To confirm that all income was declared for tax purposes
 To establish whether costs claimed were wholly and exclusively
incurred in the production of the income
 To confirm if withholding tax was withheld on payments that are
subject to withholding tax
 To establish the taxes payable, asses and demand the same

3.0 AREAS COVERED

The investigation covered the following tax heads for the period 2018 to 2022;
1) Corporation tax
2) Withholding income tax

4.0 ISSUES FOR DETERMINATION

(i) Whether Ngolu Holdings Limited can be prosecuted for deliberately
not paying the Capital Gains Tax?
(ii) Whether we can recommend the prosecution of Detiland Company
Limited for the fraud committed?

(i) Whether Ngolu Holdings Limited can be prosecuted

for deliberately not paying the Capital Gains Tax?
The team inquired from Ngolu Holdings Limited via a letter dated 29th May 2023
on the unpaid Capital Gains Tax on the sale of land LR No. 3734/338 at a
consideration of Kshs. 130,000,000.
The authority informed the company that it had not remitted the Capital Gains
Tax payable on the sale of the said land. Preliminary findings to this effect
indicate that CGT not remitted to KRA amounts to Kshs 6,250,000. Further that
this constitutes a tax offence of deliberately defaulting on the company’s
obligations contrary to section 97(a) of the Tax Procedures Act, 2015, for which
the Commissioner can initiate criminal proceedings.

However, the Commissioner, ISO I&E encouraged the taxpayer to amicably

resolve the issues at hand by making payment or arranging with the
commissioner for payment of the taxes on such terms and conditions as the
commissioner may approve.
The taxpayer was encouraged to make payment of uncontested taxes or provide a
settlement plan within 7 days. Failure to do so would invite KRA to conduct tax
assessment on the taxpayer’s company.
Vide a letter dated 29th May 2023, the taxpayer indicated that Ngolu Holdings
Company dealt in buying and selling of properties and as such exempted from
CGT.
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ISO 9001:2015 CERTIFIED

The taxpayer also brought forth financial statements showing that income of
Kshs. 130,000,000 on the sale of land to Detiland Company Limited was
recognized in their 2019 returns. KRA was satisfied that indeed the taxpayer had
declared this income in the 2019 returns.
The authority also established that the taxpayer was a developer and
as such exempted from Capital Gains Tax which is in tandem with
section 3(2)(f) of the income tax act and as per the provisions of the
eighth schedule of the Income Tax Act

(ii) Whether we can recommend the prosecution of

Detiland Company Limited for the fraud
committed?