Kenya Revenue Authority faces new legal precedents in tax disputes

Recent judicial rulings in Kenya have established new precedents regarding the burden of proof for taxpayers and the taxability of property service charges.

The High Court ruled that taxpayers challenging assessments by the Kenya Revenue Authority (KRA) must provide indexed and chronologically matched records. The court emphasized that the KRA is not required to act as a forensic accountant and that providing unorganized data does not constitute compliance. This decision overturned a Tax Appeals Tribunal ruling that had previously dismissed a Sh29.21 million assessment against Jakoline Enterprises Ltd.

In a separate matter, the Tax Appeals Tribunal blocked the KRA from taxing service charge collections managed by property management companies. The tribunal ruled in favor of Nextgen Mall Management Company, stating that funds collected for building upkeep—such as security, cleaning, and repairs—act as a conduit for unit owners rather than taxable business income. This decision follows a dispute over a Sh119.8 million tax claim involving income tax and VAT arrears.