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Disclaimer : This article is meant for informational purposes only and should not be construed as a legal opinion. Should you have any questions or need clarifications on the subject matter, kindly feel free to contact us for legal advice.
A Tax dispute can arise from various avenues but most notably through a Tax Demand Notice, Assessments or an Agency Notice issued by Kenya Revenue Authority (KRA). In the event of any such dispute, the same can be resolved through the processes discussed immediately hereunder -
1) Objection
The first recourse a Taxpayer has is to lodge an Objection against the a Tax Demand Notice. While writing an Objection a Taxpayer is to be guided by Section 51 of the Tax Procedures Act (TPA) which provides as follows -
A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if— (a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; and (b) in relation to an objection to an assessment, the Taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33 (1); and c) all the relevant documents relating to the objection have been submitted. (Emphasis Added)
An Objection should be lodged within 30 days after receipt of a Tax Demand Notice. It is key that all documents relied upon by the taxpayer be attached to the Objection.
The Taxpayer’s Objection will be reviewed by the KRA’s Independent Review of Objections (IRO) body that consists of technical officers and tax experts. The IRO may in their deliberation request for further documentation, invite the taxpayer for a meeting to review the dispute and/or conduct a site visit to better understand the taxpayer’s business.
The IRO has 60 days to come up with an Objection Decision, however for Custom Duty they have 30 days. If an Objection Decision is not made within the set timeline, then the Objection is deemed to be allowed.
2) Tax Appeals Tribunal and Alternative Dispute Resolution
A Taxpayer who is not satisfied by the IRO’s decision can challenge the Commissioner’s decision at the Tax Appeals Tribunal (the Tribunal). To ensure that a taxpayer adequately exhaust all possible remedies, the Taxpayer should first file a Notice of Appeal within 30 days from the date of Objection Decision together with a Memorandum of Appeal and Statement of Facts within 14 days from lodging of the Notice of Appeal.
Pursuant to Section 28 of the Tax Appeals Tribunal Act (TATA), any party (the Commissioner or Taxpayer) can opt to first settle the matter through an Alternative Dispute Resolution (ADR) process at any stage within the proceedings at the Tribunal. The party that seeks to pursue ADR, should first file a formal application to that effect. The application is then forwarded to KRA’S Corporate Tax Dispute Resolution Division (CTDR) which is the office within KRA that is tasked with the responsibility of facilitating the ADR process between a Taxpayer and the Commissioner.
The ADR process is done in an impartial manner through a facilitator who steers the discussions and guides the parties to reach a settlement which they have fostered themselves. The proceedings are on a ‘without prejudice’ basis and parties are encouraged to make full disclosure of all material facts incidental to their case. The ADR process as provide under Section 55 of the TATA should be carried out within 90 days. However, any party (with leave) can seek to engage in a second round of ADR.
In the event that ADR fails, the matter is referred back to the Tribunal and a hearing date is set. Under Section 56 of the TPA, the burden of proof lies with the Taxpayer.
3) Appellate Courts
Dissatisfied with the decision of the Tribunal, any aggrieved party can exercise its right of appeal to the High Court (HC). Any such appeal should be on a question of law. The aggrieved party should within 30 days of being notified of the Tribunal’s decision file its Notice of Appeal. An aggrieved taxpayer can likewise approach the HC through -
Judicial Review pursuant to Article 47 of the Constitution of Kenya and Section 9 (2) of the Fair Administrations Act, 2015; or
A Constitutional Petition pursuant to Article 22 of the Constitution of Kenya (2010).
A further appeal may lie to the Court of Appeal and subsequently to the Supreme Court upon Certification.
Finally, it is fundamental that a Taxpayer exhausts ALL possible remedies before proceeding to the Appellate Courts as was decided in Krystalline Salt Limited v Kenya Revenue Authority (2019) eKLR. The Courts would only permit Judicial Review Application when all available administrative proceedings fail to produce a satisfactory resolution.
THE END
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