TAT Adjourns Judgment to Accommodate MAP

Case Reference:Equator Bottlers Ltd v Commissioner of Domestic Taxes (Tax Appeal E624 of 2025) [2026] KETAT 160 (KLR) (13 July 2026) (Ruling)

Background

The dispute originated from a compliance check conducted by the Commissioner of Domestic Taxes (the Respondent) covering the period January 2019 to December 2022. The Respondent took issue with the Appellant, Equator Bottlers Limited, for failing to withhold tax on technical fees and computer charges paid to Coca-Cola Sabco (Pty) Ltd, a company resident in South Africa.

Following the compliance check, the Respondent issued additional withholding income tax assessments dated 31st December 2024. The Appellant objected on 10th February 2025, but the Respondent confirmed the assessments on 9th April 2025. After a partial settlement through the Alternative Dispute Resolution (ADR) mechanism, the sole surviving issue before the Tribunal was the additional withholding tax liability.

The hearing of the substantive appeal (Tax Appeal No. E624 of 2025) took place on 3rd March 2026. The Appellant adopted its witness statement, cross-examination was conducted, and the parties were directed to file written submissions, with judgment scheduled for 26th May 2026.

Crucially, the Appellant had already invoked the Mutual Agreement Procedure (MAP) under Article 25 of the Kenya-South Africa Double Tax Agreement (DTA) . The South African Competent Authority had accepted the taxpayer’s case and engaged with the Kenyan Competent Authority. On 24th March 2026, the Appellant filed a Notice of Motion seeking to stay the Tribunal proceedings pending the completion of this bilateral treaty process.

The Objection

The Respondent’s primary objection was jurisdictional. It argued that the Tribunal lacks the legal power to stay its own proceedings, particularly for an indeterminate period, based on a process over which neither party nor the Tribunal has direct control.

Relying on Section 18 of the Tax Appeals Tribunal Act, the Respondent contended that the only stay available to the Tribunal relates to suspending the implementation of the decision under review to secure the effectiveness of the appeal. The Respondent further invoked the decisions in Commissioner of Investigations and Enforcement v Estama Investments Limited [2020] and Commissioner of Domestic Taxes v Sony Holdings Limited [2021], where the High Court held that the Tribunal is a creature of statute with limited jurisdiction and possesses no express power to stay its proceedings pending the outcome of other matters.

The Respondent also submitted that the Application was an abuse of process, labelling it a “wager expedition” designed to allow the Appellant to cherry-pick a favorable outcome while holding the domestic appeal in abeyance.

Equator Bottlers’ Arguments

The Appellant anchored its case on the constitutional and treaty framework of Kenya:

• Constitutional Standing of Treaties: The Appellant relied on Articles 2(5) and 2(6) of the Kenyan Constitution, which establish that general rules of international law and ratified treaties form part of Kenyan law. The Kenya-South Africa DTA, whose preamble records the objective of avoiding double taxation, is therefore legally binding.
• The MAP is a Treaty Right: The Appellant argued that Article 25(1) of the DTA confers on a taxpayer the right to present a case to the Competent Authority, irrespective of domestic remedies. Once accepted, the matter becomes a government-to-government process. The South African Competent Authority had already accepted the case and engaged the Kenyan Authority.
• International Best Practice (BEPS Action 14): The Appellant drew the Tribunal’s attention to the OECD and UN Commentaries on Article 25, particularly Paragraph 44, which provides that domestic recourse provisions are ordinarily held in abeyance in favor of the less formal and bilateral MAP. It also cited Paragraph 77, which supports suspending domestic remedies pending MAP.
• Comparative Jurisprudence: The Appellant relied on persuasive authorities, including Glencore Energy UK Ltd v Revenue & Customs [2019] (UK FTT) and Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] (Australia FCAFC), where stays were granted to allow MAP to conclude.
• Procedural Discretion: The Appellant relied on Rule 27 of the Tax Appeals Tribunal (Procedure) Rules, 2015, which permits the Tribunal to determine an appropriate procedure where no specific procedure is prescribed.

KRA’s Arguments

The Respondent advanced several counterarguments against the merits of the Application:

• No Evidence of Formal MAP: The Respondent contended that the supporting affidavit only disclosed an intention to initiate MAP, rather than providing proof that a formal request had been presented to the Competent Authority.
• Wrong Forum for MAP Invocation: The Respondent argued that Article 25(1) of the DTA requires an aggrieved person to present the case to the Competent Authority of the Contracting State of which the person is a resident. Since Equator Bottlers is a resident of Kenya, presenting the case through the South African Competent Authority was procedurally improper.
• Timing and Abuse of Process: The Respondent submitted that the Application was filed after the hearing had been concluded and judgment was imminent. It characterized the move as forum-shopping, designed to hold the Tribunal in abeyance pending a favorable MAP outcome.
• UN Commentary: The Respondent relied on Paragraph 42 of the United Nations Model Commentary on Article 25, which suggests that where a taxpayer’s suit is ongoing on the very issue, competent authority discussions should await a court decision.

TAT Decision

The Tribunal conducted a careful analysis and issued a ruling that balanced procedural jurisdiction with Kenya’s international obligations.

A. On Jurisdiction: The Tribunal distinguished the Respondent’s reliance on Sony Holdings and Estama Investments. Those cases involved stays pending litigation before a Superior Court, where the Tribunal would suspend its mandate indefinitely. The present Application sought a deferment to facilitate a bilateral treaty mechanism (MAP), not to await a court decision elsewhere.

The Tribunal affirmed that while it is a creature of statute, its power to manage its own process is reinforced by Rule 21(4) (adjournment for sufficient reason) and Rule 27 (determining appropriate procedures). The Tribunal clarified that granting the order was not an arrogation of jurisdiction, but a valid exercise of its procedural discretion to adjourn the judgment date.

B. On the Merits (MAP): The Tribunal found that the Application was merited. It emphasized that Articles 2(5) and 2(6) of the Constitution mandate respect for ratified treaties. The Kenya-South Africa DTA is part of Kenyan law, and the MAP mechanism is specifically designed to resolve the exact type of juridical double taxation presented in this case.

The Tribunal distinguished its earlier position in De La Rue Currency and Security Print Limited v Commissioner of Domestic Taxes (Income Tax Appeal No. E106 of 2021). In De La Rue, the taxpayer sought to defeat the Tribunal’s jurisdiction entirely on the basis of MAP. In Equator Bottlers, the taxpayer sought only a finite deferment of judgment to allow an active bilateral process to run its course. The Tribunal held that acknowledging MAP is non-mandatory does not preclude, in an appropriate case, granting a short and defined period for its completion.

C. Final Orders:

The Tribunal issued the following pragmatic orders:

1. The Notice of Motion Application was allowed to the extent that the judgment delivery date was adjourned.
2. The Parties were granted leave to settle the dispute out of the Tribunal by pursuing the MAP.
3. The settlement period was strictly capped at one hundred and twenty (120) days from the date of the Ruling (i.e., until approximately 10th November 2026).
4. Upon the lapse of 120 days without a settlement, the dispute shall automatically revert to the Tribunal for determination and issuance of a judgment.
5. No orders were made as to costs