On 23 February 2026, the Tax Appeals Tribunal delivered its judgment in Premier Credit Limited v. Commissioner of Domestic Taxes (Tax Appeal E1149 of 2024) [2026] KETAT 23 (KLR). The Tribunal held that the principal amount of written-off loans is capital in nature and therefore not deductible for income tax purposes. Many analysts felt that the decision was controversial, as it appeared to depart from the commercial reality that lenders lose their trading stock when loans become irrecoverable.
The relief has come faster than expected. On 10 April 2026, the High Court of Kenya delivered its judgment in the consolidated appeals Branch International Limited v. Commissioner of Domestic Taxes (HCITA/E080/2025 & E089/2025). In that decision, the High Court differed with the Tribunal’s position. The court held that in a lending business, the principal amount advanced as loans constitutes circulating capital – the stock-in-trade of the enterprise – rather than fixed capital. Consequently, the principal of written-off loans is deductible as a bad debt under section 15(2)(a) of the Income Tax Act and Legal Notice No. 37 of 2011.
