NAIROBI, Kenya — The Court of Appeal has ruled that the Kenya Revenue Authority (KRA) cannot suspend statutory tax deadlines simply because related proceedings are pending before the Tax Appeals Tribunal or the courts.
The appellate court held that where a taxpayer has lodged a valid objection and the Commissioner fails to issue a decision within the 60-day period prescribed by law, the objection is deemed to have been allowed.
The decision reinforces the statutory requirement under Section 51(11) of the Tax Procedures Act, which provides that an objection is deemed allowed when the Commissioner fails to make an objection decision within the prescribed period.
Court Rejects KRA’s Delay Argument
The dispute arose from VAT refund claims exceeding Sh168 million, some of which had remained unresolved for as long as seven years.
Some of the claims had already been audited, while others had not been audited or determined.
KRA argued that it had delayed taking action because related proceedings before the Tax Appeals Tribunal and the courts were still pending.
The Court of Appeal rejected that position, holding that a statutory deadline cannot be suspended by administrative convenience or by the Commissioner’s unilateral decision to await the outcome of separate proceedings.
The court emphasised that public authorities can only exercise powers granted to them by the Constitution or statute and must comply with mandatory timelines set by Parliament.
60-Day Rule for Tax Objections
The ruling reaffirmed the legal effect of the 60-day deadline governing tax objections.
Section 51(11) of the Tax Procedures Act requires the Commissioner to make an objection decision within 60 days of receiving the notice of objection or any further information required from the taxpayer. Failure to do so means the objection is deemed allowed.
Kenyan courts and the Tax Appeals Tribunal have previously applied the provision to cases where KRA issued objection decisions outside the statutory period.
The latest Court of Appeal decision therefore reinforces that the timeline is a mandatory statutory obligation rather than an administrative target.
Judicial Review Route Clarified
The appellate court also clarified when a taxpayer can approach the High Court through judicial review.
It distinguished between a statutory tax appeal, which examines the correctness of a tax decision, and judicial review, which examines whether a public authority acted lawfully and complied with its statutory obligations.
The court held that the requirement to exhaust the tax appeals process does not necessarily prevent a taxpayer from approaching the High Court where KRA has failed to make a decision within the time required by law.
In such circumstances, there may be no tax decision available for the taxpayer to challenge through the ordinary statutory appeal mechanism.
Court Warns Against Bypassing Tax Appeals Process
The judges, however, placed limits on the use of judicial review.
A taxpayer cannot use judicial review simply to bypass the statutory tax appeals process or obtain payment of a disputed refund where the underlying entitlement to the tax refund remains contested.
The distinction means that a court can examine whether KRA complied with its legal duties without necessarily determining the substantive tax dispute itself.
VAT Refund Dispute Involved Sh168 Million
The case involved several delayed VAT refund claims amounting to more than Sh168 million.
The taxpayer had also challenged KRA’s rejection of certain refund claims arising from a dispute over whether particular services qualified as zero-rated exported services.
The dispute therefore involved both the authority’s compliance with statutory timelines and the underlying question of whether the taxpayer was entitled to the disputed VAT refunds.
The Court of Appeal’s decision did not finally determine that underlying entitlement.
Earlier Decision Set Aside
The appellate court overturned the earlier decision that had rejected the taxpayer’s case in its entirety.
However, it stopped short of directing KRA to determine or pay the disputed VAT refunds immediately.
Instead, the complaints concerning compliance with statutory timelines and fair administrative action were sent back to the High Court for determination on a priority basis.
The ruling therefore establishes a distinction between enforcing KRA’s obligation to act within the law and deciding whether a taxpayer is ultimately entitled to receive a disputed tax refund.
Implications for Taxpayers and KRA
The decision provides further judicial guidance on the consequences of delays in tax administration.
For taxpayers, it reinforces the legal significance of statutory deadlines governing objections and administrative decisions.
For KRA, the ruling underscores that pending proceedings in another forum do not, by themselves, suspend statutory obligations unless the law provides for such a suspension.
