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Case Reference: Ocean Network Express Kenya Ltd v Commissioner of Domestic Taxes (Appeal E1306 of 2025) [2026] KETAT 327 (KLR)

One Kenya is a Kenyan shipping agency operating mainly through the Port of Mombasa.
It acted as the exclusive agent of Ocean Network Express PTE Ltd, a container shipping line incorporated and resident in Singapore.
One Kenya’s agency services were supplied to a non-resident and used outside Kenya.
The services therefore qualified as exported services and were zero-rated for VAT.
One Kenya did not charge VAT on its services, but it paid VAT on local inputs such as security, office fit-out, and IT services.
This created excess input tax, which One Kenya sought to recover from KRA.

On 29 August 2024, One Kenya lodged five VAT refund applications for December 2022 to July 2024.
The total refund claimed was Kshs. 12,188,702.
KRA replied the same day that the claims could not be processed because they had been forwarded for audit.
In October 2024, KRA issued a formal VAT refund audit notice.
On 4 March 2025, KRA’s audit team confirmed that the refund audit had been completed and forwarded to Refund Headquarters.
On 11 August 2025, KRA approved and paid one claim of Kshs. 5,339,124 for December 2022 to March 2023.
On 10 and 18 September 2025, KRA rejected the remaining four claims totaling Kshs. 6,849,578.
KRA also issued Credit Adjustment Vouchers restoring the rejected amounts as excess input tax available for carry forward.

The claimed inputs were reimbursable by the principal.
One Kenya, as an agent of the principal, was not entitled to deduct the input VAT.

Section 47(4A) of the Tax Procedures Act required KRA to determine audited refund applications within 120 days.
The 120-day period expired on 27 December 2024.
Failure to determine the applications meant they were deemed ascertained and approved by operation of law.
The rejection orders were issued 377 and 385 days after lodgement.
The rejection orders were therefore nullities.
Alternatively, KRA violated One Kenya’s legitimate expectation under Section 47 of the TPA.
On the merits, the services were exported and zero-rated.
The agency contract was private and could not defeat One Kenya’s statutory right to input VAT under Section 17 of the VAT Act.

The appeal was filed late.
KRA argued that its letter of 29 August 2024 was the actual refund decision.
One Kenya should have appealed within 30 days under Section 47(13) of the TPA.
The audit was a standalone exercise under Section 59 of the TPA.
The September 2025 rejection orders were system-generated follow-ups to the earlier decision.
No legitimate expectation can arise in contravention of the law.
One Kenya was an agent whose principal reimbursed its expenses and taxes.
Therefore, One Kenya was not entitled to claim input VAT.

Whether the appeal was properly before the Tribunal.
Whether KRA’s refund rejection decisions were issued outside the timelines under Section 47 of the TPA.
Whether One Kenya was entitled to the VAT refunds claimed.

On jurisdiction: The letter of 29 August 2024 did not determine the claims. It only referred them for audit.
The appealable decisions were the rejection orders of 10 and 18 September 2025.
The appeal was therefore properly before the Tribunal.
On timelines: KRA subjected the claims to an audit under Section 47(4) of the TPA.
KRA was required to determine the applications within 120 days.
The deadline was 27 December 2024.
The rejection orders were issued 377 and 385 days after lodgement.
The word “shall” in Section 47(4A) is mandatory.
The deeming provision is self-executing.
The four applications were deemed approved by operation of law.
The later rejection orders were nullities.
On entitlement: The agency contract is a private arrangement between One Kenya and its principal.
It cannot extinguish One Kenya’s statutory right to input VAT under Section 17 of the VAT Act.
The disputed inputs were One Kenya’s own operating costs.
The services were exported and zero-rated.
KRA’s Credit Adjustment Vouchers acknowledged that the input tax was genuine and attributable to One Kenya.
The Tribunal adopted the reasoning in Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes.

The appeal was allowed.
KRA’s VAT refund rejection orders dated 10 and 18 September 2025 were set aside.
The four refund applications were allowed by operation of law under Section 47(4A) of the TPA.
KRA was ordered to pay One Kenya Kshs. 6,849,578 within 60 days.
Each party was to bear its own costs.

Statutory timelines for refund determinations are mandatory.
A deeming provision can approve a refund by operation of law.
A rejection issued after the statutory deadline is a nullity.
An agency contract cannot defeat an agent’s statutory input VAT rights.
Private reimbursement arrangements do not override the VAT Act.
Tax authorities must decide claims within the law or lose the right to reject them.

KRA Cannot Reject VAT Refund After 120 Days

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