A Tax Offset Without A Legal Procedure: Standard Chartered’s Loss

Case Study: Standard Chartered Bank Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal E402 of 2024) [2025] KETAT 170 (KLR) (14 March 2025) (Judgment)

Background 

• The dispute arose from a tax assessment by the Kenya Revenue Authority 2019–2020 period, where Standard Chartered Bank Kenya had underpaid taxes in 2020 and planned to offset it with an overpayment from 2019 without following legal procedure.
• KRA claimed that Standard Chartered Bank Kenya underpaid taxes by Kshs 841,502,229 and the bank objected, arguing that it had overpaid taxes in 2019 (Kshs 832,944,755) and sought to offset this against its 2020 tax liability.
• KRA rejected the offset claim and imposed penalties and interest (Kshs 45,489,854) on the alleged underpayment.
• The bank appealed to the Tax Appeal Tribunal.

The Bank’s Argument

• Standard Chartered claimed it had overpaid Corporate Income Tax (CIT) in 2019 (Kshs 832 million) and sought to offset this against its 2020 tax liability without a formal refund application.
• It relied on past practice, arguing that the KRA had previously allowed such offsets.

KRA’s Counterargument

• The KRA insisted that Section 47 of the TPA mandates a formal refund process before any offset can be applied.
• Since the bank did not apply for a refund, the KRA treated the 2020 tax as unpaid, triggering penalties and interest (Kshs 45.4 million).

Tribunal’s Findings

• Incompetent Appeal: The Tribunal ruled that the appeal was not properly filed because the bank did not submit a formal refund application as required under Section 47 of the TPA.
• The KRA’s decision letter (27 February 2024) was not an appealable decision under tax laws.
• No Valid Refund Claim: The Tribunal found that the bank could not unilaterally offset overpaid taxes without following the refund process under Section 47.
• Penalties and Interest: Since the bank did not follow the correct refund procedure, the KRA’s imposition of penalties and interest was not unlawful.

This case underscores the importance of following legal protocols for businesses, whether filing for refunds, lodging objections, or seeking refunds. Strict adherence to tax procedures is essential because procedural missteps can derail even valid claims.

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