Nairobi Expressway contractor to shoulder Sh6.9b tax bill
Business
By
Joackim Bwana
| Aug 05, 2025
The contractor of the Nairobi Expressway has been ordered to pay Sh6.9 billion in taxes to the Kenya Revenue Authority (KRA) after the National Treasury failed to remit the money to the taxman.
High Court Judge Justice Freda Mugambi upheld the decision by the Tax Appeals Tribunal to compel Cale Infrastructure Construction Company Ltd to pay the money.
The firm was subcontracted by Moja Motorway Company Ltd (Moja) to undertake pre-construction works for the Nairobi Expressway Project.
Cale argued in the hearing that, as government agencies, the Treasury and KRA were expected to resolve the unpaid tax bill internally, rather than shifting the burden to the entity.
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Treasury failed to bear the tax liability on certain materials used in the project, which is now in use and managed by Moja.
The Tax Tribunal ruled that KRA was entitled to recover the taxes from the construction company since the taxman was not a party to the agreement between Treasury and Cale.
KRA said it did not issue a formal demand for the taxes but merely advised the construction company to follow up with Treasury for settlement of the government’s undertaking.
Cale Infrastructure was required to mobilise, establish a site camp and yard fabrication, and procure construction machinery and materials under Phase One and construct a 27-kilometre stretch extending from Mlolongo, along Uhuru Highway, to the James Gichuru Road junction in Westlands.
The company was granted tax exemptions in respect of customs duty, value-added tax (VAT), import declaration fees (IDF), and the railway development levy (RDL), which applied to motor vehicles, spare parts, equipment, and materials or services imported or procured locally for purposes of constructing the Nairobi Motorway.
After the completion of the Motorway, KRA undertook an audit of the company’s operations for the period 2020 to 2022 in regard to tax compliance on import duty, VAT, IDF, and RDL that arose from the construction of the Nairobi Motorway Project.
KRA issued a review decision of a tax liability amounting to Sh6,924,759,976.
However, Cale only admitted liability for Sh3,505,951 and settled the same on July 12, 2023.
Justice Mugambi stated that although Treasury had undertaken to bear the tax liability on certain materials consumed in the project, the primary obligation to pay the said taxes nonetheless rested with the construction company.
“While it is not disputed that the National Treasury issued an undertaking to pay the tax on certain project materials, the legal duty to pay taxes under the applicable tax statutes remains with the importer, in this case, the appellant,” said Justice Mugambi.
She said the letter of undertaking did not have the legal effect of transferring the statutory liability from Cale Infrastructure to Treasury, nor did it create an enforceable obligation on the part of KRA to pursue payment from Treasury in place of the appellant.
“Accordingly, and for the foregoing reasons, I find that the appeal is devoid of merit. The decision of the Tax Appeals Tribunal dated 19th July, 2024, is hereby upheld in its entirety. Each party shall bear its own costs of the appeal,” said Justice Mugambi.
In its appeal, Cale said the KRA erroneously demanded Sh359,047,353 in taxes on machinery, equipment, and motor vehicles on the basis that the Nairobi motorway project had been completed, thereby rendering the exemptions no longer applicable.
The firm also faulted KRA for demanding Sh863,234,745 in taxes on hardware tools and spares on the assertion that the project had been completed and that the customs security bonds had been cancelled.
Cale said the taxman also erroneously demanded Sh5,698,971,927 in taxes on materials consumed in the project, notwithstanding the government’s express undertaking to settle that liability.
However, KRA said the project was completed on May 13, 2022, based on the Completion Certificate issued by the Kenya National Highways Authority (KeNHA), following a joint inspection.