International School of Kenya Ordered to Pay Sh1.4 Billion Tax to KRA

The International School of Kenya (ISK) has been ordered to pay Sh1.4 billion in unpaid taxes to Kenya Revenue Authority (KRA).

This is after the tax appeals tribunal dismissed the institution’s bid to block KRA from recovering the unpaid taxes citing diplomatic immunity.

The tax authority demanded the amount from the prestigious school after discovering that it was running a separate payroll for local and foreign workers.

Kenyan employees at the schools were deducted pay-as-you-earn (PAYE) while workers from the US and Canada earned their pay without tax deduction. The institution also failed to deduct income tax on tuition, fringe, and utility benefits for its local workforce.

In its defense, ISK argued that due to the diplomatic composition of its board, it assumed that expatriates would be exempted from local taxes. It cited a letter from the Ministry of Foreign Affairs approving the establishment of the school in 1976.

“The tribunal finds that neither the diplomatic composition of ISK board of governors nor diplomatic correspondence exchanged between the missions and the Ministry of Foreign Affairs conferred any privileges of immunity to ISK or its expatriate staff,” the tribunal led by Patrick Lutta ruled.

“The objection decision of March 2016 confirming the PAYE assessment in the sum of Sh1.4 billion is hereby upheld.

KRA contended that the immunities of ISK board members did not extend to its foreign workers, adding that having a board of US and Canadian diplomats did not mean the school attained a diplomatic status and that expatriates earning an income in Kenya are required to pay local taxes unless exempted by the National Treasury.

KRA added that the school applied for exemption from corporation tax but failed to apply for PAYE.

ISK is owned by the US and Canadian embassies and teaches the Northern America curriculum.