No business proceeds to the Tax Appeals Tribunal thinking they will lose a case. Why waste time and resources anyway? While a significant number of taxpayers win, the TAT records over the years paint an alarming picture; several Kenyan businesses walk away with the very tax assessment they were trying to fight, plus additional costs. At Gichuri & Partners, we have walked hand in hand with businesses as they challenge unsatisfactory KRA tax assessments. As part of this journey, we review TAT and High Court decisions to understand why taxpayers lost their cases.
And after carefully reviewing many cases, it’s clear that most businesses don’t lose because the law was against them. They lose because of avoidable shortcomings, whether procedural, evidentiary, or legal. In this post, you’ll discover the common reasons why businesses lose at the KRA Tax Appeals Tribunal and how you can avoid them. We have included real case examples in which businesses lost cases at the TAT, along with what the TAT said in its decision.
Common Reasons Why Businesses Lose at the KRA Tax Appeals Tribunal
Below are the common reasons why businesses lose KRA appeals:
1. Missing Statutory Timelines (Late Filing)
Section 13 of the Tax Appeals Tribunal Act gives taxpayers upto 30 days after receiving the objection decision to file a case at the TAT. Most businesses honor this deadline, although a few miss it. What’s not obvious for most businesses is the 14-day deadline to submit the Memorandum of Appeal and Statement of Facts. Regardless of how strong your appeal is, the TAT will dismiss it if you miss these timelines.
Real Case Example: In the TAT Appeal No. 203 of 2023, Rural Distributors Enterprises lost the case for missing the 30-day deadline. TAT ruled that the appellant failed to file the case within the 30 days and didn’t apply for leave.
2. Failure to Discharge the Burden of Proof
According to the Tax Procedures Act, the “burden of proof lies with the taxpayer.” Many businesses walk into the Tax Appeals Tribunal as they would walk into any other court of law, where both the plaintiff and defendant argue their case. That is not what happens at the TAT.
As a taxpayer, you must demonstrate how the KRA’s tax decision is incorrect. This is where evidential mistakes come in. If your evidence, supporting documents, and legal arguments do not prove that KRA’s erred in their tax decision, you will lose the case. The TAT is not a neutral court. It upholds the KRA tax assessment until you prove otherwise.
Real Case Example: In the 2020 TAT case, Viva Afya Limited vs Commissioner of Domestic Taxes, the TAT upheld KRA’s assessment because the appellant failed to table sufficient invoices and bank reconciliations to show how the assessment was excessive.
3. Weak Paperwork
From experience, we can confidently say that weak paperwork is the number one mistake that costs businesses their wins at the Tax Appeals Tribunal. It’s closely related to failure to discharge the burden of proof, because how can you prove anything without supporting documentation?
Poor documentation bites businesses where it hurts when KRA conducts an audit and issues a tax assessment. If you escalate the matter to the TAT, the same inconsistencies discovered during the audit will be highlighted if you have no records to show otherwise. Real Case Example: In the TAT Appeal Case No. E410 of 2023, the TAT dismissed a Ksh. 1 billion appeal by the Kitui County Government because the county failed to provide evidence to support its assertions and claims.
4. Raising New Arguments at the Appeal Stage
We’ve already discussed the KRA tax dispute resolution process at length, including the objection, ADR, and appeal stages. It’s very important to exhaust all the legal arguments of a tax dispute during the objection stage. That’s why it’s crucial to seek the guidance of an experienced tax agent.
Most businesses approach a tax dispute resolution casually, “moving with the flow.” As the case escalates, they start getting serious and thinking of new legal angles and arguments. This is a mistake. The Tribunal limits itself to the issues raised during the initial objection to the KRA Commissioner. The lesson here is not to treat the objection stage casually but to look at it as a potential precursor of the appeal stage.
5. Invalid Objection
Another common mistake that businesses make is to think that the TAT will save them from KRA’s negative objection decision. It’s like a toddler running to the father for consolation because they think the mother is being unfair.
What businesses don’t realize is that an invalid or defective objection is the end of the road. If your objection was filed without the required documents or outside the statutory timeline, KRA will invalidate it. So will the TAT when the case escalates to the Tribunal.
Real Case Example: In the Digital Box Limited vs Commissioner of Investigations and Enforcements (2020), KRA invalidated the taxpayer’s objection, citing a lack of supporting documents. In the TAT Appeal No. 115 of 2017, the Tribunal agreed with KRA and confirmed the tax assessment.
6. Lack of a Legal Basis
In our TAT vs. ADR discussion, we highlighted the need for a legal question to make TAT a suitable path for dispute resolution. Unless you are 100% sure the tax dispute is a misinterpretation of Kenyan tax laws, consider other avenues like Alternative Dispute Resolution (ADR). Businesses that challenge KRA assessments based on moral or commercial grounds rarely win tax appeals in Kenya. Winning requires challenging existing laws, and not arguing that the assessment was unfair or commercially unreasonable.
Real Case Example: In the KRA vs. OLA Kenya Limited appeal, OLA Kenya won the case because of a strong legal basis.OLA argued that KRA erred in law and fact by issuing tax assessments beyond the 5-year timeline allowed by the Tax Procedures Act. The TAT allowed the appeal and set aside the objection decision.
7. Lack of Proper Professional Representation
The Kenyan law allows taxpayers to self-represent in the Tax Appeals Tribunal. However, research shows that legal or professional representation is critical for navigating complex litigation processes. Failing to secure the services of a tax attorney or registered tax agent is a common mistake that makes businesses lose big at the TAT. Self-representation reflects in:
- Statutory interpretation
- Case law analysis
- Evidence presentation
- Written submissions.
Self-representation shows in many ways, like poorly written memoranda of appeal, vague objection grounds, and submissions that fail to address legal arguments. Once a dispute escalates to the TAT, it becomes a legal battle, not a mere accounting discussion with tax administration.
Final Words
Losing at the Tax Appeal Tribunal in Kenya is rarely about dramatic mistakes, but common pitfalls that can be avoided. These include missing statutory timelines, weak documentation, procedural non-compliance, and poor legal arguments. Professional representation can help businesses avoid these mistakes by preparing meticulously long before filing the Notice of Appeal.
As soon as you decide to appeal a tax dispute at the KRA Tax Appeals Tribunal, seek guidance from a registered KRA tax agent. They will help you approach the litigation strategically, raising the chances of a positive outcome. Do you need help navigating the KRA Tax Appeals Tribunal process in Kenya? We are a registered and experienced agent in Nairobi, Kenya. Contact us today to get started.
