When the System Watches: IFMIS Cross-Referencing Exposes VAT Gaps as Tribunal Rules Against Vejossy Company

Case Study:Vejossy Company Limited v Commissioner of Domestic Taxes (Tax Appeal E556 of 2025) [2026] KETAT 46 (KLR)

The Genesis of the Dispute: IFMIS Data Triggers Compliance Check

The dispute began when the Kenya Revenue Authority (KRA), through the Respondent, the Commissioner of Domestic Taxes, subjected Vejossy Company Limited (the Appellant) to a compliance check. The company was flagged for review following a cross-reference of data from the Integrated Financial Management System (IFMIS) shared by the SABS Northern Region. IFMIS is a government system used for public financial management, and the KRA has integrated it with its own iTax system to gain real-time visibility into taxpayer activity, particularly for those supplying goods or services to the government.

The data revealed significant discrepancies: the Appellant had failed to fully declare its Value Added Tax (VAT) for several tax periods, including November 2021, February, June, and March 2022, and April 2024. Based on this information, the KRA issued an additional VAT assessment order on 27th November 2024, for a total of Kshs 1,189,989.10 in principal tax.

The Appeal and the Appellant’s Stalled Argument

The Appellant sought leave to file a late objection, which was granted, and subsequently objected to the assessment on 3rd March 2025. The core of its argument was that the Respondent erred in law and fact by disallowing input tax deductions. The Appellant claimed that the input expenses were legitimate, directly related to its taxable supplies, and therefore allowable under Sections 17 and 19 of the Value Added Tax Act (VATA). It further asserted that it had submitted all requisite supporting documentation, including valid tax invoices and transaction records, to demonstrate a clear link between the input VAT incurred and its business income.

However, the KRA maintained that despite its requests, the Appellant failed to provide the necessary documents to validate its objection. The Respondent argued that the Appellant’s objection was invalid as it did not meet the requirements of Section 51(3)(c) of the Tax Procedures Act (TPA), which mandates a taxpayer to provide all relevant documents when objecting to an assessment. Without the documentary support, the KRA confirmed the assessment in its Objection Decision dated 27th March 2025, prompting the Appellant to escalate the matter to the Tax Appeal Tribunal.

The Tribunal’s Analysis: The Unwavering Burden of Proof

The Tribunal identified a single, critical issue for determination: whether the Respondent was justified in confirming the assessment. In its analysis, the Tribunal placed significant emphasis on the legal principle of the burden of proof in tax matters.

The Tribunal cited Section 56(1) of the Tax Procedures Act (TPA) , which unequivocally states: “In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.” This was further reinforced by Section 30 of the Tax Appeals Tribunal Act (TATA) , which requires an appellant to prove that an assessment is excessive or that a tax decision should not have been made. The Tribunal noted that the High Court has consistently upheld this position, for instance, in Commissioner of Domestic Taxes v Block International Limited and Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement.

The Tribunal then turned to the specific statutory requirements for claiming input VAT. Section 17(3) of the VATA is explicit: a claim for input tax deduction must be supported by an original tax invoice, a customs entry, or a credit/debit note. Furthermore, the general duty to keep records is enshrined in Section 23 of the TPA and Section 43 of the VATA, which mandate taxpayers to maintain full and true records of every transaction for a period of five years.

When the Tribunal examined the documents filed by the Appellant, it found a critical failure. The Appellant had only submitted its objection acknowledgment receipt, KRA PIN certificate, certificate of incorporation, and CR12. The Tribunal noted that these documents could not, in any way, demonstrate that the input tax was claimable or that the Respondent’s assessment was incorrect. The Appellant did not file a single document listed under Section 17(3) of the VATA, such as valid tax invoices, to support its claim.

The Verdict: Appeal Dismissed for Lack of Evidence

In a clear and firm judgment, the Tribunal concluded that the Appellant had failed to discharge its burden of proof. Consequently, the Tribunal issued the following orders:

1. The Appeal was dismissed.
2. The Respondent’s objection decision dated 27th March 2025 was upheld.
3. Each party was ordered to bear its own costs.

Key Takeaways for Taxpayers

The Vejossy Company Limited case serves as a stark reminder and a practical guide for all businesses operating in Kenya. The judgment underscores several non-negotiable principles:

• The Burden of Proof is on the Taxpayer: This is not a shared burden. If you dispute a tax assessment from the KRA, the onus is on you, the taxpayer, to provide clear, credible, and statutory-compliant evidence to prove the decision is wrong. The Tribunal has shown it will not hesitate to rule against taxpayers who fail to do so.
• IFMIS Data is a Powerful Audit Tool: The KRA’s use of third-party data, particularly from IFMIS, is now a standard practice for identifying compliance gaps. Businesses supplying goods or services to the government should ensure that their declared sales and VAT returns perfectly align with the data held by public procurement systems.
• Documentation is the Cornerstone of VAT Claims: Possessing valid tax invoices and other documents listed under Section 17(3) of the VATA is not merely a good practice; it is a mandatory legal requirement to claim input VAT. Without these original documents, a claim for input tax is unlikely to succeed.
• Procedural Compliance is Paramount: The Tribunal struck out the Appellant’s written submissions for being filed outside the timelines it had ordered. This highlights the importance of strictly adhering to all procedural directions and timelines set by the Tribunal to avoid being penalized even before the merits of a case are heard.

This judgment echoes the sentiments of other recent TAT and High Court rulings, which have consistently shifted the risk back to taxpayers to maintain impeccable records and prove their case. It sends a clear message: in the face of a KRA assessment, an assertion is not enough; the evidence, as prescribed by law, must be produced. The era of digital surveillance and data-driven audits has made robust record-keeping and proactive tax compliance more critical than ever for the survival and success of any business in Kenya.