01/11/2025
When (and when not) to approach the courts — under the Tax Procedures Act, 2015 (TPA) and related procedure and where taxpayers lost their cases through non-compliance
Introduction
The Tax Procedures Act (TPA) was enacted to “harmonise and consolidate the procedural rules for the administration of tax laws in Kenya”. It provides the framework for how tax laws are administered, how taxpayers should comply, how objections and appeals are handled, and when the courts (or tribunals) may be engaged. For taxpayers, understanding the process is as important as the substantive tax law, because failure to follow procedures often means losing your case — even before you get to the merits.
This article explains key things taxpayers must know, the critical procedural checkpoints, when it makes sense to challenge the tax authority, and when not to, with examples of recent cases
What taxpayers should know
1. Registration, obligations and record-keeping
Under the TPA:
Section 8 requires registration of taxpayers.
Section 23 (TPA) places obligations on persons to maintain documents required under a tax law, to keep them for the period of 5 years (or shorter where permitted) from the end of the reporting period.
Records must enable the person's tax liability to be readily ascertained.
What this means for taxpayers:
Make sure you are properly registered and your PIN (personal identification number) etc is up to date.
Keep proper books and records (in Kenya shillings, as required).
Retain records for at least five years (unless a shorter period is specified) because if you cannot produce them, you are vulnerable.
When audited or under query, you’ll have to support your position with documentation.
2. The burden and standard of proof
In tax disputes, the burden of proof as well as deadlines and procedure matter. The courts have held:
Generally, a tax authority (Kenya Revenue Authority, KRA) assessment is presumed correct unless the taxpayer shows otherwise.
Once the taxpayer produces credible records, the authority must respond with substantive evidence rather than mere assumptions.
Where fraud is alleged or non-compliance is serious, higher standards of proof apply and lack of records is a heavy burden on the taxpayer.
Thus a taxpayer must be proactive: maintain evidence, make sure your submissions are clear, timely, documented. Failure to do so often means the procedural defence fails and you get beaten on process rather than substance.
3. Objection, appeal and courts
Under the TPA and the Tax Appeals Tribunal regime, the following key steps apply:
A taxpayer who receives an assessment or a decision must lodge a notice of objection in the approved form and manner within the timeframe prescribed.
Only after the objection decision is issued can you normally appeal (either to the Tribunal or court) depending on the tax law.
The TPA sets out rights of audit, inspection, assessment, objection, amendment, review and appeal.
Knowing whether you have complied with all the procedural steps is critical before going to the courts.
4. When to engage the courts – and when not
When to approach the court / tribunal:
After you have followed the procedural steps (objection, review, appeal) and you have a legitimate dispute on the merits (for example you believe the tax law was mis-applied).
If you have strong documentary evidence, have engaged KRA/Commissioner, and believe your rights under the TPA have been breached (eg arbitrary assessment, violation of procedure, denial of hearing).
If you have exhausted or properly followed the objection mechanism and the next recourse is the Tribunal or High Court.
If a binding private ruling or clarification was ignored or wrongly applied and you have grounds for judicial review.
When not to approach the courts (or at least to think twice):
If you have failed to comply with the procedural obligations (eg you did not file an objection in time, did not keep required records, did not exhaust administrative remedies). Courts may dismiss purely on procedural grounds.
If your case is weak on evidence (you have no or weak records, you cannot show the assessment is incorrect). The cost (legal fees, risk) may outweigh the benefit.
If you have not first attempted administrative resolution or sought a private ruling when available: one of the cases below emphasises that the taxpayer failed to do so.
If you ignore deadlines: many cases are lost because the taxpayer missed the time-limits under the TPA or relevant tax law.
5. Non-compliance pitfalls – what often causes taxpayer losses
Failure to keep and produce records: Many cases show this is a key reason taxpayers lose.
Failure to reconcile banking/income figures (eg bank deposit method) where KRA uses such analysis.
Failure to apply for private rulings or to clarify tax liability when the law allows (eg sec 65 TPA).
Allowing estimates or disclosures by KRA without challenge or negotiation.
Late filing of objections, or missing the window to appeal.
Ignoring audit/enquiry notices or failing to respond within time.
Cases where taxpayers lost due to non-compliance
Here are some illustrative recent Kenya law report cases where the taxpayer lost, and procedural non-compliance or weak evidence featured:
1. BAC/GKA JV Company Limited v Commissioner of Domestic Taxes (Appeal 1410 of 2022) [2024] KETAT 107 (KLR) (2 February 2024):
The appellant (an engineering consultancy) had been given additional assessments by KRA for VAT, income tax and WHT.
The Tribunal dismissed the appeal. It emphasised that the taxpayer failed to provide sufficient evidence to reconcile variances between bankings and income tax returns; and that it should have applied for a private ruling under sec 65 TPA to clarify its liability.
In short: weak evidence + failure to seek ruling = loss.
2. David Waruiru Kariuki v Commissioner of Domestic Taxes (Tribunal Appeal 836 of 2022) [2023] KETAT 902 (KLR) (10 November 2023):
The taxpayer’s appeal was struck out. While details are not given in summary, the fact of striking out indicates procedural failure (such as objection not filed in time or lack of competence).
3. Constitutional challenge to KRA’s powers under the TPA:
In the case of the petitioner Okiya Omtatah challenging KRA’s powers under Sections 57, 58(2), 59 & 99 of the TPA, the High Court held that KRA’s powers (inspection, production of records) were constitutional and that taxpayers must comply with their self-assessment obligation; it emphasised that the TPA has safeguards but the taxpayer must “do their part in properly complying with the law so no suspicion arises at KRA”.
Here while the taxpayer did go to court, they lost because the complaint did not successfully invalidate KRA’s procedural powers — again underlying the importance of compliance.
These cases reinforce the lesson: engaging the courts is not a substitute for complying with administrative and procedural obligations. Losing often comes down to failure of process rather than pure tax
Practical Tips for Taxpayers
Keep thorough records: bank statements, invoices, receipts, books, reconciliations. Be ready for analyses like the banking-method.
Observe deadlines: file objections in time, appeal in proper form and within required timelines. Missing these often means courts will not even consider your case.
Use private rulings where applicable: sections 63-65 of the TPA permit the taxpayer to apply for a private ruling for proposed transactions to get the Commissioner’s interpretation. Failure to do so was a reason for defeat in BAC/GKA above.
Engage KRA early: if you have doubts about assessments, communicate, request clarification, submit objections rather than immediately litigate.
Be realistic about going to court: Only go if you have followed all administrative steps and you have a strong case on the merits. If the risk of losing (and costs) is high, consider settlement.
Check whether the dispute is about procedure or substance: Sometimes the issue is purely procedural (eg time-limit, form of objection) and you might lose before merits are heard.
Understand your rights: The taxpayer has rights under the taxpayer charter (information, hearing, appeal) but these are exercised through the procedures in the TPA and related laws.
Understand KRA’s powers: Under the TPA, KRA has wide powers of audit, inspection, assessment, amendment. For example, sections 57, 58, 59 give inspection and production powers
Conclusion
For taxpayers in Kenya, the message is clear: compliance with the procedural rules under the Tax Procedures Act is as important as compliance with substantive tax law. Approaching the courts without having laid the correct procedural foundation is risky and often unsuccessful. The cases discussed show that when taxpayers have weak records, fail to seek private rulings, fail to reconcile banking/income variances, or miss deadlines, they lose their case — even if they may have had arguable substantive issues.
Therefore: do your homework, keep your records, follow the objection/appeal timelines, engage with KRA administratively, and only once your procedural house is in order consider litigation. The court should be the last resort, not the first.
