https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/160

Equator Bottlers Ltd v Commissioner of Domestic Taxes (Tax Appeal E624 of 2025) [2026] KETAT 160 (KLR) (13 July 2026) (Ruling) Neutral citation: [2026] KETAT 160 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E624 of 2025 RM Mutuma, Chair, G Ogaga, T Vikiru & JM Malla, Members July 13, 2026 Between Equator Bottlers Limited Appellant and Commissioner of Domestic Taxes Respondent Ruling 1.The Applicant filed a Notice of Motion dated 23rd March 2026 and filed on 24th March 2026 seeking the following Orders: -a.The proceedings in Tax Appeal No. E624 of 2025 be stayed pending completion of the Mutual Agreement Procedure (MAP) provided for under Article 25 of the Kenya-South Africa Double Tax Agreement.b.The costs of this Application be in the appeal. 2.The Application which is supported by an Affidavit sworn by Joe Mutisya, the Applicant’s Finance Director, dated 23rd March 2026 and filed on 24th March 2026, is premised on the following grounds:a.The technical fees and computer charges paid to Coca-Cola Sabco (Pty) Limited, a company resident in South Africa have been taxed in South Africa. The Respondent’s attempt to tax these charges in Kenya amounts to double taxation.b.Kenya and South Africa are parties to a Double Tax Agreement (DTA) which provides for relief from double taxation.c.Article 25 of the DTA provides for Mutual Agreement Procedures (MAP) where the actions of a Contracting State result or will result in double taxation contrary to the provisions of the DTA, irrespective of the remedies provided by domestic law.d.The Appellant has already invoked MAP by presenting its case to the Competent Authority of South Africa pursuant to Article 25(1) of the DTA and the Competent Authority of South Africa has engaged with the Competent Authority of Kenya.e.This Honourable Tribunal took judicial notice of its Ruling in TAT Appeal No. 151 of 2016 that MAP should first be exhausted before a matter can proceed for hearing before the Tribunal. Such judicial notice is in accordance with international guidance, best practice and law. Appellant/Applicant’s Submissions 3.The Appellant/Applicant filed submissions dated and filed on 23rd April 2026 in support of its Application. 4.The Appellant/Applicant premised its case on the constitutional standing of treaties in Kenyan law. Relying on Article 2(5) and 2(6) of the Constitution, it pointed out that the general rules of international law and any treaty or convention ratified by Kenya form part of the law of Kenya. On that footing, the Kenya-South Africa Double Tax Agreement (DTA), whose Preamble records the objective of avoiding double taxation and preventing fiscal evasion, is part of Kenyan law and is to be given effect accordingly. 5.It explained that the dispute originates from the Respondent's compliance check for the period January 2019 to December 2022, during which the Respondent faulted the Appellant/Applicant for failing to withhold tax on technical fees and computer charges paid to Coca-Cola Sabco (Pty) Ltd, a resident of South Africa. The Appellant/Applicant's position is that those payments were already subjected to tax in South Africa and that the Respondent's attempt to tax them again in Kenya occasions juridical double taxation contrary to the DTA. 6.The Appellant/Applicant recounted that Coca-Cola Sabco (Pty) Ltd presented a case to the South African Competent Authority under Article 25(1) of the DTA, that the South African Competent Authority found the case justified, and that it has since engaged the Kenyan Competent Authority with a view to resolving the matter by mutual agreement under Article 25(2). 7.Turning to the framework governing the Mutual Agreement Procedure (MAP), the Appellant/Applicant reproduced Article 25 of the DTA in full and urged that the provision furnishes its own machinery for resolving disputes between the Contracting States on the interpretation and application of the treaty. 8.It reasoned that MAP is central to achieving the Preamble's purpose of avoiding double taxation; that Article 25(1) confers on a taxpayer a right to present a case to the Competent Authority notwithstanding any domestic remedies; that, once the Competent Authority accepts the case as justified, the matter becomes a government-to-government process between the two States; and that Article 25(2) obliges the Competent Authorities to endeavour to resolve the case by mutual agreement. 9.The Appellant/Applicant anchored its case in international law principles that, by dint of Article 2(5) of the Constitution, form part of Kenyan law. It highlighted Kenya's membership of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and the four BEPS minimum standards, including Action 14 on making dispute resolution mechanisms more effective. 10.Minimum Standard 1 requires that treaty obligations relating to MAP be implemented in good faith and that MAP cases be resolved in a timely manner, an obligation said to flow from the pacta sunt servanda principle in Article 26 of the Vienna Convention on the Law of Treaties. 11.It drew the Tribunal's attention to the OECD and UN Commentaries on Article 25. Paragraph 44 of the OECD Commentary (echoed by the UN Commentary) records that, depending on domestic procedures, the choice of redress is normally that of the taxpayer, and that in most cases it is the domestic recourse provisions such as appeals or court proceedings that are held in abeyance in favour of the less formal and bilateral MAP. 12.Paragraph 77 was cited for the position that domestic legal remedies would ordinarily be suspended pending the outcome of MAP, while Paragraph 7 of the OECD Commentary (endorsed by paragraph 12 of the UN Commentary) was relied upon to characterise MAP as an independent dispute resolution mechanism accessible irrespective of domestic litigation. 13.The Appellant/Applicant urged that the right to MAP is additional to, and not a substitute for, domestic remedies; that it is autonomous and not contingent on the exhaustion, exclusion or pursuit of domestic remedies; and that, being a right, the taxpayer is under no obligation to invoke it. It added that BEPS Action 14 Best Practice 7 leaves the choice between MAP, domestic remedies, or both, to the taxpayer, and that where a taxpayer elects to prioritise MAP the domestic process should be managed to support rather than frustrate that election, including by staying domestic proceedings. 14.In support, the Appellant/Applicant relied on the decision of the United Kingdom First-Tier Tribunal (Tax Chamber) in Glencore Energy UK Ltd & Anor v Revenue & Customs [2019] UKFTT 438 (TC), where a stay of domestic appeals was granted to enable a MAP between the United Kingdom and Swiss Competent Authorities. 15.It pointed out that the stay was granted because the MAP was capable of resolving the issues in dispute, the Swiss Competent Authority had accepted the MAP request, it was the taxpayer's choice whether to proceed by appeal or MAP, and the stay was not indefinite but limited to the completion of the MAP. 16.The Appellant/Applicant further placed reliance on the Australian decision in Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145, where the Full Federal Court granted a stay of domestic proceedings to allow the MAP to conclude. 17.It noted the Court's reasoning that refusing a stay risked double taxation because the two States might arrive at different outcomes, would improperly force the taxpayer to choose between MAP and domestic proceedings, and would constrain rather than facilitate the MAP, the OECD and UN Commentaries and the Action 14 Final Report all confirming that the choice of forum rests with the taxpayer. 18.Applying those authorities, the Appellant/Applicant contended that it has exercised its treaty right to invoke MAP; that its case has been accepted by the South African Competent Authority, which has engaged the Kenyan Competent Authority; and that the MAP is capable of resolving the issues in this appeal. 19.It cautioned that continuing the domestic appeal in parallel would duplicate effort and risk determinations that could constrain or undermine the MAP and give rise to unrelieved double taxation, whereas a stay would preserve the status quo without extinguishing the Respondent's position or ousting the Tribunal's jurisdiction, the domestic appeal remaining open should the MAP fail. 20.Responding to the Grounds of Opposition, the Appellant/Applicant relied on Rule 27 of the Tax Appeals Tribunal (Procedure) Rules, 2015, which permits the Tribunal to determine an appropriate procedure where there is no applicable procedure under the Rules or the Act, as conferring the discretion to adopt a fair and orderly procedural course. 21.It maintained that no statutory provision prescribes when a MAP must be initiated or precludes its invocation once an appeal is on foot; that there is no requirement to exhaust MAP as a condition precedent to an appeal, particularly given the strict timelines for instituting a domestic appeal; and that characterising its recourse to MAP as a “wager expedition” was unjustified, the MAP being an express treaty entitlement protected by the constitutional guarantees of access to justice and fair administrative action under Articles 25 and 47 of the Constitution. 22.In conclusion, the Appellant/Applicant invoked Kenya's treaty obligations and the pacta sunt servanda principle under Article 26 of the Vienna Convention and Article 2(5) of the Constitution, urging that a stay was both necessary and appropriate, would occasion no prejudice to the Respondent, and would safeguard it from the real risk of unrelieved double taxation. It accordingly prayed that the proceedings in Tax Appeal No. E624 of 2025 be stayed pending the conclusion of the MAP, that the costs of the Application be in the appeal, and for any other relief the Tribunal deems just. Respondent’s Opposition 23.The Respondent opposed the Application by filing its Grounds of Opposition dated 1st April 2026 and filed on the same date. 24.It cited the following grounds:i.That the there exists no known legal provision that allows the Honourable Tribunal to stay its own proceedings on account of other proceedings before any dispute resolution forum or a Superior Court in the absence of an order staying the same.ii.That the Application is an abuse of the Tribunal process noting that the Applicant has so participated in these proceedings knowing very well that they had not exhausted the statutory provided remedies before moving to the Honourable Tribunal.iii.That the Application is an abuse of the Tribunal processes as the Applicant is on a "wager expedition" where they seek to either hold the Tribunal process in abeyance awaiting a favourable decision from Mutual Agreement Procedure. Respondent’s Submissions 25.The Respondent filed its written submissions dated and filed on 6th May 2026 in opposition to the Application. 26.The Respondent opposed the Application through its submissions and its Grounds of Opposition. It gave the background that, following a compliance check for the period January 2019 to January 2022, it issued assessments dated 31st December 2024 in respect of additional withholding income tax on technical fees and computer-related charges paid to Coca-Cola Sabco (Pty) South Africa; that the Appellant/Applicant objected on 10th February 2025; that the Respondent confirmed the assessments on 9th April 2025; and that, following an Alternative Dispute Resolution process that partially settled the matter, the sole surviving issue concerns the additional withholding income tax. 27.It added that Coca-Cola Sabco (Pty) Ltd is ultimately owned by entities not resident in South Africa, so that, in its view, the DTA exemption could not benefit the Appellant/Applicant. 28.The Respondent's principal contention was that the Tribunal lacks jurisdiction to stay its own proceedings, more so for an indeterminate period, on the basis of a process over which neither party has control. It reasoned that the only stay open to the Tribunal is the power under Section 18 of the Tax Appeals Tribunal Act to stay or otherwise affect the implementation of the decision under review for the purpose of securing the effectiveness of the proceedings and the determination of the appeal, and that nothing in the Act clothes the Tribunal with jurisdiction to stay its own proceedings. 29.It contended that the Appellant/Applicant's reliance on Rule 27 of the Tax Appeals Tribunal (Procedure) Rules, 2015 was misconceived, jurisdiction being a creature of the Constitution or statute that cannot be conferred through judicial craftsmanship. In support, the Respondent cited the Supreme Court decision in Samuel Kamau Macharia & Another v Kenya Commercial Bank Ltd & 2 Others [2012] eKLR, for the proposition that a court's jurisdiction flows from the Constitution or legislation and that a court cannot arrogate to itself jurisdiction exceeding that conferred by law. 30.The Respondent placed reliance on Commissioner of Investigations and Enforcement v Estama Investments Limited [2020] KEHC 10245 (KLR) and Commissioner of Domestic Taxes v Sony Holdings Limited [2021] KEHC 7496 (KLR), for the position that the Tribunal is a creation of statute with limited jurisdiction and that there is no provision under which it can stay its own proceedings on account of other proceedings pending before a Superior Court. It urged that the same principle bars a stay founded on a purported resolution at the MAP. 31.On the merits, the Respondent argued that even if the Tribunal possessed the jurisdiction, the Application was not merited. It noted that the appeal was filed on 13th June 2025 and that the Application was only brought after the hearing of the appeal, once the Appellant/Applicant realised that its failure to exhaust statutory mechanisms had been raised. It faulted the Appellant/Applicant for adducing no evidence that a case had in fact been presented to the Competent Authority of South Africa, the affidavit sworn on 23rd March 2026 disclosing only an intention rather than proof of any request. 32.The Respondent further pointed out that Article 25(1) of the DTA requires an aggrieved person to present a case to the Competent Authority of the Contracting State of which the person is a resident. As the Appellant/Applicant is a resident of Kenya, it argued that presenting the case through South Africa was contrary to the DTA. It defined the Competent Authority under the DTA as, in Kenya, the Cabinet Secretary responsible for finance or an authorised representative, and, in South Africa, the Commissioner for the South African Revenue Service or an authorised representative. 33.The Respondent characterised the Application as an attempt to cherry-pick a forum and hold the Tribunal in abeyance pending a favourable MAP outcome, amounting to an abuse of process. It relied on paragraph 42 of the Commentaries to Article 25 of the United Nations Model Double Taxation Convention, to the effect that, where a taxpayer's suit is ongoing on the very issue for which mutual agreement is sought, discussions at the competent authority level should await a court decision. 34.It urged that the Tribunal cannot stay its own proceedings for an indeterminate period in the absence of a court order addressed to it, and prayed that the Application be found unmerited and dismissed with costs. Analysis and Findings 35.The Appellant/Applicant seeks for the proceedings in Tax Appeal No. E624 of 2025 to be stayed pending completion of the Mutual Agreement Procedure (MAP) provided for under Article 25 of the Kenya-South Africa Double Tax Agreement. 36.The hearing of Tax Appeal No. E624 of 2025 by the Tribunal was held on 3rd March 2026, wherein the Appellant/Applicant’s Witness statement of Archi Ramana dated 23rd February 2026 and filed on the same date was adopted as evidence in chief and presented for cross-examination and re-examination. The Parties were then directed to file their respective written submissions on or before 24th March 2026, and a judgment date of 26th May 2026 was given. 37.The Appellant/Applicant filed this Notice of Motion Application. On 15th May 2026, the Tribunal issued these directions: that Parties to file their respective submissions, that the Application is referred to Panel 1 for mention on 3rd June 2026 for further directions, and the judgment date of 26th May 2026 be deferred to such a date as shall be directed by Panel 1. 38.The Tribunal has considered the Application, the supporting affidavit of Joe Mutisya, the Grounds of Opposition, the rival submissions and the authorities relied upon. Flowing from the pleadings, two issues fall for determination: first, whether the Tribunal has jurisdiction to grant the orders sought; and second, whether the Application is merited. 39.On the first issue, the Respondent's opposition proceeds on the premise that the Appellant/Applicant seeks a stay of the Tribunal's own proceedings for an indeterminate period, a course said not to be permitted under the Tax Appeals Tribunal Act. 40.The Tribunal accepts, as a matter of settled law, that it is a creature of statute exercising only the jurisdiction conferred upon it. In Commissioner of Domestic Taxes v Sony Holdings Limited [2021] KEHC 7496 (KLR) the High Court, following Commissioner of Investigations and Enforcement v Estama Investments Limited, held that the Tribunal is a creation of statute with limited jurisdiction and that there is no provision empowering it to stay its own proceedings on account of other proceedings pending before a Superior Court. 41.The Respondent invoked that authority, together with the caution in Samuel Kamau Macharia & Another v Kenya Commercial Bank Ltd & 2 Others [2012] eKLR against a court arrogating to itself a jurisdiction not conferred by law. 42.The Tribunal finds that the Sony Holdings case does not block the present Application. The reasoning in that case, and in the Estama Investments case was directed at a stay of Tribunal proceedings sought on account of parallel litigation pending before a Superior Court, the concern being that the Tribunal would suspend its own mandate indefinitely to await the outcome of a suit whose result was unknown and over which it had no control. 43.The present Application is of a different character. The Appellant/Applicant does not ask the Tribunal to give up its mandate pending a decision of a Superior Court; it asks the Tribunal to allow the parties a defined period within which to pursue the Mutual Agreement Procedure (MAP), a bilateral treaty mechanism engaged between the Kenyan and South African Competent Authorities, before the Tribunal delivers its judgment. 44.The Respondent relied on Section 18 of the Tax Appeals Tribunal Act, however, the Tribunal notes that the provision concerns orders staying or affecting the implementation of the decision under review and is not the source of the Tribunal's authority to regulate the timing of its own judgment. 45.The Tribunal's power to manage its process derives from its position as an adjudicative body and is reinforced by Rule 27 of the Tax Appeals Tribunal (Procedure) Rules, 2015, which permits the Tribunal to determine an appropriate procedure where no applicable procedure exists under the Rules or the Act, and by Rule 21(4), which permits the Tribunal, for sufficient reason, to adjourn proceedings and fix a convenient date. 46.Contrary to the Respondent's argument, using these provisions does not create jurisdiction where none exists; the Tribunal already has jurisdiction to hear and determine the appeal, and the only question is which procedure to follow in exercising it. 47.On the second issue, the Tribunal turns to whether the Application is merited. Article 2(5) and 2(6) of the Constitution make the general rules of international law and treaties ratified by Kenya part of Kenyan law, and the Kenya-South Africa DTA, whose Preamble records the object of avoiding double taxation, is accordingly part of the law the Tribunal applies. 48.Article 25 of the DTA establishes the Mutual Agreement Procedure through which the Competent Authorities of the two States may resolve, by agreement, taxation not in accordance with the treaty. The OECD and UN Commentaries on Article 25, and BEPS Action 14, recognise MAP as a taxpayer-driven mechanism and record, at paragraph 44 of the OECD Commentary, that the choice of redress is normally that of the taxpayer and that domestic recourse provisions are ordinarily held in abeyance in favour of the MAP. 49.The Tribunal is aware of the decision in De La Rue Currency and Security Print Limited v Commissioner of Domestic Taxes (Income Tax Appeal No. E106 of 2021), in which the High Court held that the OECD and UN Commentaries do not require MAP proceedings to take precedence over local proceedings, reasoning that the words “shall endeavour” in the mutual agreement article render the process non-mandatory, and affirming that the Tribunal retains jurisdiction to determine a dispute notwithstanding the existence of a MAP. 50.Nothing in this Ruling changes that decision. The Tribunal fully accepts that MAP does not take away its jurisdiction and does not force it to refuse to hear the appeal; the taxpayer cannot insist that MAP take priority over the Tribunal's mandate. 51.The De La Rue case is, however, distinguishable on its facts and its consequence. There, the taxpayer sought to defeat the Tribunal's jurisdiction altogether by asserting that the MAP had to be exhausted before the Tribunal could hear the matter; here, the Appellant/Applicant does not challenge the Tribunal's jurisdiction but merely seeks a finite deferment of judgment to permit an active bilateral engagement, already accepted by the South African Competent Authority, to run its course. 52.Acknowledging that MAP is not mandatory is not inconsistent with permitting, in an appropriate case and as a matter of discretion, a short and defined period for its completion. 53.Exercising that discretion, the Tribunal is satisfied that a finite deferment is warranted. The subject matter of the appeal, the withholding tax treatment of cross-border technical fees and computer charges under the Kenya-South Africa DTA, is precisely the kind of juridical double taxation dispute that the MAP is designed to resolve. 54.As averred by the Appellant/Applicant, the South African Competent Authority has accepted the case and engaged its Kenyan counterpart; and the comparative jurisprudence in Glencore Energy UK Ltd v Revenue & Customs and Oracle Corporation Australia Pty Ltd v Commissioner of Taxation confirms that, where a MAP is capable of resolving the dispute and has been accepted, the orderly course is to allow the treaty mechanism a defined opportunity to operate rather than to permit parallel processes to pre-empt or frustrate it. 55.The Tribunal is also aware of the Respondent's legitimate concern, and of the caution in Sony Holdings and Estama, that an open-ended suspension is impermissible; that concern is met by confining the deferment to a fixed period, upon the lapse of which the Tribunal will proceed to determine the appeal irrespective of the state of the MAP. 56.The Tribunal has weighed the Respondent's contentions that no evidence of a formal request to the Competent Authority was placed before it, that the Appellant/Applicant, as a Kenyan resident, ought to have presented its case through the Kenyan Competent Authority, and that the timing of the Application discloses forum-shopping. 57.While the evidentiary record on the precise status of the MAP is not extensive, the supporting affidavit and the unchallenged position that the South African Competent Authority has engaged the Kenyan Competent Authority are sufficient, for the limited purpose of this Application, to establish that a bilateral process is genuinely underway. 58.Further, the Respondent’s residence objection relates to the eventual merits of the withholding tax dispute and the proper operation of Article 25, not to whether a finite deferment should be granted, and is best resolved when the appeal is heard on its merits if the MAP does not resolve the dispute. A defined deferment does not prejudice the Respondent, whereas refusing it risks the very double taxation the DTA exists to prevent. 59.For the avoidance of doubt, the Tribunal finds and affirms that granting the Parties additional time to explore a resolution of the dispute out of the Tribunal is not a stay of its proceedings but an adjournment of the judgment date, a course firmly within its procedural control. Disposition 60.The Tribunal finds that the Application is merited and accordingly proceeds to issue the following Orders: -a.The Notice of Motion Application dated 23rd March 2026 and filed on 24th March 2026 be and is hereby allowed to the extent that the judgment delivery date has been adjourned.b.The Parties be and are hereby granted leave to settle the dispute out of the Tribunal by pursuing Mutual Agreement Procedure (MAP) and the settlement shall be made within one hundred and twenty days (120) from the date of delivery of this Ruling.c.Upon the lapse of 120 days from the date of this Ruling, and where the Parties fail to settle the dispute within the period specified in Order b., the dispute shall be referred back to the Tribunal for determination and issuance of a judgment.d.No orders as to costs. 61.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF JULY 2026.……………………………ROBERT M. MUTUMACHAIRMAN……………………………… ……GLORIA A. OGAGAMEMBER………………………………DR. TIMOTHY B. VIKIRUMEMBER………………………………JIMMY M. MALLAMEMBER