Does a KRA public statement supersede the written tax laws?


AOTL lodged a vat claim of Kshs. 86,608,095/- for the period of February 2016 to May 2016 via Form VAT 4 and that the same was received on 27/2/2017. AOTL further lodged the same VAT refund claim through the ITAX platform on 22/3/2017

The same was assessed by KRA and a sum of Kshs. 44,697,690/- was disallowed on the grounds that the claim was time barred.

Dissatisfied by KRA’s assessment, AOTL lodged an appeal at the Tax Appeals Tribunal (“the Tribunal”) whereby judgment was delivered on 21/5/2021 in AOTL’s favor.

KRA appealed to the High Court on the following grounds:

· That the Tribunal erred in failing to address the issue of the notice to taxpayers to switch to the ITAX platform for tax services and failed to consider evidence by KRA with regard to the claim of February being lodged out of time.

· That the Tribunal failed to consider the provisions of section 75(1)(b) of the Tax Procedures Act and based its judgment on section 68 of the VAT Act CAP 476 and held that AOTLs claim was not time barred

AOTL averred that:

· that KRA’s actions in disallowing AOTLs manual VAT refund were not justified despite it being empowered by section 75(1)(b) of the TPA to authorize certain actions to be done electronically. In line with section 17(5) of the VAT Act, KRA was only precluded from refunding excessive VAT where the statutory timelines had not been met and in case of making zero rated supplies.

· the requirement to lodge VAT claims electronically was not backed by law as the public notice provided guidance to taxpayers. That the public notice in any event would be considered subsidiary legislation that could not override the provisions of the VAT Act. That the VAT claim was lodged within the statutory timelines under section 17(5)(b) of the VAT Act.

KRA argued that

· the Tribunal and AOTL wrongly applied Paragraph 11 of the VAT regulations, which was inconsistent with the VAT Act of 2013. Since KRA had prescribed the manner in which the returns ought to be submitted, AOTL did not have a basis for lodging a manual return. Counsel submitted that section 17(5) of the VAT allowed taxpayers to claim refunds, and thus, the claim lodged on 22/3/2017 was outside the statutory period allowed.

In its decision on 02/12/2022, the High Court observed that:

· there were no regulations until 2017. Therefore, by virtue of section 68 (3) of the Act, the subsidiary legislation of the repealed act was in force at the time of lodging the claim.

· KRA’s power is limited by law, and any action taken must be based on the law. In this case, at the time of the public notice, no regulations were in place and AOTLs used the manual form as per section 68 of the VAT Act which provided that the subsidiary legislation made under the repealed Act was still in force as long as it was not inconsistent with the Act

· There was no error in the judgment of the Tribunal in holding that the claim lodged on 27/2/2017 was filed within 12 months.

As such AOTL won the case

Does a KRA public statement supersede the written tax laws?

Leave a Reply