Background Facts
Harley Berry Limited is a private limited liability company incorporated in Kenya under the Companies Act and a registered taxpayer. The company operated in the Kenyan market for years, filing its returns and paying what it believed to be its lawful tax obligations. During the years 2022, 2023, and 2024, the company claimed input VAT from various suppliers in the ordinary course of its business.
However, on 26th March 2025, the Kenya Revenue Authority (KRA), through the Commissioner of Domestic Taxes, issued an additional VAT assessment amounting to Kshs. 317,909,009. The assessment covered the years 2022 to 2024 and was based on findings that the company had filed nil returns for the period January 2022 to July 2022 despite having withholding VAT credits, and upon filing amended returns in November 2023, failed to declare the sales attributable to those credits. The KRA further noted that the company claimed input VAT from suppliers who were nil filers, non-filers, or not registered for VAT at the time of the claims. Additionally, for suppliers such as Coolextreme International Limited and Ndume Chainlinks Limited, the company claimed more input VAT than the total sales declared by those suppliers.
The company lodged a notice of objection on 27th May 2025, challenging the assessment. The KRA issued an objection decision on 25th July 2025 confirming the assessment in its entirety. Aggrieved by the KRA’s decision, Harley Berry Limited filed a Notice of Appeal at the Tax Appeal Tribunal on 28th September 2025.
The Appeal and Key Arguments
Harley Berry Limited’s Arguments
Harley Berry Limited argued that it was not given enough time to provide supporting documentation. The company contended that due to timeline constraints, the KRA went ahead and issued the objection decision before the company could produce documents required from its suppliers. The company submitted that the assessments raised did not factor in the inputs incurred in the respective months and that the valid inputs which could be traced in the iTax and ETIMS systems ought to have been allowed.
The company provided a tabulated analysis of what it believed to be valid inputs for various months, including figures for January 2022, May 2022, June 2022, July 2022, October 2023, November 2023, December 2023, January 2024, and February 2024. The company further argued that it had additional manual receipts it was pursuing from its archives and from suppliers, though this effort had not been successful to date. The company also requested to be allowed an average of 40% of its turnover as deductible input VAT, reasoning that since it could not obtain exact receipts, a reasonable approximation should be permitted.
The company maintained that it had availed the support documentation to the KRA and that its appeal should be considered on its merits. It prayed that the records be reconciled, the reconciled tax vacated, and the due amount adjusted.
Kenya Revenue Authority’s Arguments
The KRA contended that the disallowance of input VAT was lawful and in accordance with Section 17 of the VAT Act, which provides that input VAT is deductible only where it arises from an actual taxable supply and is supported by valid documentation. The KRA argued that in the present case, the company’s claim was based on invoices from suppliers who were either nil filers, non-filers, or not registered for VAT, and that in some cases, the company had claimed more input VAT than the suppliers had declared in total sales.
The KRA further submitted that despite the company’s claims that it had all the relevant supporting documents, it failed to provide any supporting documents to confirm the assertions indicated in its objection letter. The KRA argued that the company disregarded Section 23(b) of the Tax Procedures Act, which requires a person to maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained.
The KRA also noted that by the time the company was filing returns for the relevant periods, the six-month period for claiming input VAT under Section 17 of the VAT Act had already lapsed. Additionally, the KRA argued that the company’s objection offended Section 51(3)(c) of the TPA, which requires that all relevant documents relating to the objection be submitted.
The KRA maintained that pursuant to Section 24(2) of the TPA, it is not bound by a tax return or information provided by a taxpayer and may assess a taxpayer’s tax liability using any information available to the Commissioner. The KRA further relied on Section 31(1) of the TPA, which allows the Commissioner to amend an assessment using best judgment. The KRA submitted that it exercised its best judgment given the limited information available and subjected the information to the provisions of the VAT Act and TPA. The KRA asserted that the company failed to prove that the Commissioner’s tax decision was in any way inconsistent, based on extraneous factors, excessive, or incorrect.
Tribunal’s Analysis and Findings
Issue: Whether the KRA Erred in Confirming the Taxes Assessed Upon the Appellant
The Tribunal analyzed the factual matrix and legal framework governing input VAT claims. It observed that Section 56(1) of the TPA provides that in any proceedings, the burden shall be on the taxpayer to prove that a tax decision is incorrect. Further, Section 30 of the Tax Appeals Tribunal Act imposes the burden on the appellant to prove that an assessment is excessive or that a tax decision should not have been made or should have been made differently.
The Tribunal noted the High Court’s decision in Commissioner of Domestic Taxes v Block International Limited [2024] KEHC 8889 (KLR) , where the court stated that pursuant to Section 30 of the TATA and Section 56(1) of the TPA, the taxpayer bears the burden of proving that a tax assessment and/or decision is incorrect. Similarly, in Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement [2023] KEHC 23537 (KLR) , the High Court held that the balance of proof lies with the party with knowledge of the facts.
The Tribunal further observed that Section 23 of the TPA requires a person to maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained and to retain documents for five years. Section 43 of the VAT Act similarly mandates a taxpayer to keep a full and true written record of every transaction for a period of five years.
The Tribunal noted that to claim credit for input tax against output tax, Section 17(3) of the VAT Act provides the documentation required. The taxpayer must adduce original tax invoices issued for the supply or certified copies, customs entries duly certified and receipts for payment of tax, credit notes, debit notes, or other specified documents. The question before the Tribunal was whether the appellant adduced documents to justify its claims.
The Tribunal perused the appellant’s pleadings and noted that the company only filed the following documents: the notice of objection with no supporting documents, and the KRA’s objection decision. The Tribunal held that these highlighted documents could not demonstrate that input tax was claimable, nor did they demonstrate that the KRA erred in confirming the assessment. The appellant did not file a single document listed under Section 17(3) of the VAT Act.
The Tribunal further observed that Section 13(2)(d) of the TATA mandates the taxpayer to adduce such other documents as may be necessary to enable the Tribunal to make a decision on the appeal. The appellant failed to discharge this obligation. The Tribunal found that the appellant failed to file documents to demonstrate that the KRA erred in confirming the assessment and consequently failed to discharge its burden of proof.
The Tribunal held that the KRA was justified in confirming the assessment given the complete absence of supporting documentation from the taxpayer. The company’s plea that it needed more time was rejected, as the Tribunal found that the appellant was afforded ample time to provide documents but failed to do so.
Final Decision
On 14th August 2026, the Tribunal delivered its judgment dismissing the appeal in its entirety. The orders made were as follows: the appeal was hereby dismissed, the KRA’s objection decision dated 25th July 2025 was upheld, and each party was ordered to bear its own costs.
Key Lessons for Taxpayers
1. Documentation is the Cornerstone of Tax Compliance: Harley Berry Limited’s failure to produce any of the documents required under Section 17(3) of the VAT Act proved fatal to its case. The company filed only its notice of objection and the KRA’s objection decision—neither of which demonstrated the validity of its input VAT claims. Taxpayers must maintain proper records and produce them when required. The law requires original tax invoices, customs entries, credit notes, debit notes, and other specified documents. Explanations and narratives are no substitute for proper documentation.
2. The Burden of Proof is on the Taxpayer: Section 56(1) of the TPA and Section 30 of the TATA place the burden squarely on the taxpayer to prove that an assessment is incorrect or excessive. Harley Berry Limited failed to discharge this burden. The company could not simply assert that it needed more time; it had to produce evidence. The Tribunal was clear that the burden is not on the KRA to prove the taxpayer’s case. When the KRA issues an assessment, the presumption of correctness attaches, and it is the taxpayer who must demolish that presumption with evidence.
3. Taxpayers Must Keep Records for Five Years: Section 23 of the TPA and Section 43 of the VAT Act require taxpayers to maintain records for five years. Harley Berry’s inability to produce documents from 2022, 2023, and 2024 suggests a failure in record-keeping that directly contributed to its loss. Taxpayers cannot blame suppliers or the passage of time when the law imposes a clear obligation to maintain records. The company’s claim that it had difficulties tracing manual copies from its archives was not a defense to its legal obligation.
4. Time Limits for Claiming Input VAT are Strict: Section 17 of the VAT Act provides that input tax shall be allowable for deduction within six months after the end of the tax period in which the supply or importation occurred. By the time Harley Berry filed its amended returns and claimed input VAT, the six-month window had long since closed. Taxpayers must claim input VAT promptly and within the statutory timeline. Delay is not an option, and no amount of explanation will revive a lapsed claim.
5. Verify Your Suppliers and Their Compliance: While the Chairmania Events case established that taxpayers cannot be penalized solely for their suppliers’ non-compliance when they have produced proper documentation, Harley Berry’s case demonstrates the opposite scenario. The company had claimed input VAT from suppliers who were nil filers, non-filers, or not registered for VAT, and in some cases claimed more input VAT than the suppliers had declared in sales. These red flags could have been identified through proper supplier due diligence. Regular KRA PIN checks, VAT ledger reconciliations, and supplier compliance reviews are essential.
6. Best Judgment Assessments are Justified Where Records are Inadequate: Under Section 31(1) of the TPA, the Commissioner may amend an assessment using best judgment where the taxpayer’s records are inadequate. The KRA exercised its best judgment in this case because Harley Berry failed to provide proper records. Where taxpayers fail to maintain and produce records, they cannot complain that the KRA’s assessment is excessive. The assessment is presumed correct, and it is the taxpayer’s burden to prove otherwise.
7. The Need for Complete and Verifiable Records: This case reinforces that tax documentation should not merely exist—it should reconcile across the entire transaction trail. Invoices, payment records, bank statements, and ledgers must tell the same commercial story. For practitioners, this reinforces the importance of maintaining complete and verifiable records, as well as the importance of testing the full audit trail during a tax health check, rather than waiting until an assessment to discover that the supporting records do not speak to each other.
8. Digital Records in iTax and ETIMS are Insufficient: Harley Berry argued that the iTax and ETIMS systems showed valid input claims. The Tribunal was not persuaded. The law requires specific documentation under Section 17(3) of the VAT Act, and digital records alone do not satisfy this requirement. Taxpayers cannot rely solely on the KRA’s systems to prove their claims. They must maintain their own records and produce them when required.
Conclusion
The decision in Harley Berry Limited v Commissioner of Domestic Taxes [2026] KETAT 278 (KLR) is a stark reminder of the consequences of poor record-keeping and failure to comply with documentation requirements under the VAT Act. While the Chairmania Events case established that compliant taxpayers should not be penalized for their suppliers’ non-compliance, Harley Berry’s case demonstrates the opposite—that where a taxpayer fails to produce documentation and claims input VAT from questionable suppliers, the assessment will be upheld.
In Kenya’s self-assessment tax system, the burden rests on the business to keep proper records and produce them when required. Taxpayers cannot simply assert that they need more time or that their suppliers have delayed providing documents. The law requires paper, and when the paper is missing, the consequences can be catastrophic.
Harley Berry’s loss of Kshs. 317,909,009 is a cautionary tale for every business in Kenya. For practitioners, this reinforces the importance of maintaining complete and verifiable records, verifying suppliers continuously, claiming input VAT within statutory timelines, and ensuring that documentation is audit-ready at all times.
