https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/307

REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT NAIROBI TAT APPEAL NO E997 OF 2025 KENYA WATERPROOFING COMPANY LIMITED.........................….... ……APPELLANT -VS- COMMISSIONER FOR DOMESTIC TAXES..............................................RESPONDENT JUDGMENT BACKGROUND 1. The Appellant is a limited liability company incorporated in Kenya, and whose principal business involves construction, repair, and maintenance services. 2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in parts 1 & 2 of the First Schedule to the Act, including assessing, collecting, and accounting for all tax revenues in accordance with those laws. Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 1 of 12 3. The Respondent issued the Appellant with additional VAT Assessment Orders on 30th May, 2025, for January, February, March, June, July, August and October 2024. 4. The Appellant objected to the Respondent’s additional VAT Assessment Orders on 25th June, 2025. Subsequently, the Respondent issued its Objection Decision dated 14th August, 2025 entirely upholding the additional VAT assessments. 5. Aggrieved by the Respondent’s Objection Decision, the Appellant lodged this Appeal vide its Notice of Appeal dated 10th September, 2025. THE APPEAL 6. In its Memorandum of Appeal dated 10th September, 2025, the Appellant raised the following grounds of appeal: - a. The Respondent erred in disallowing input VAT that was validly and accurately accounted for by the Appellant and declared in the supplier’s VAT return. b. The Respondent was not justified in disallowing input VAT on the grounds that the supplier had not been paid. c. The Respondent was not justified in invalidating input VAT that was genuinely incurred in the production of taxable (vatable) supplies. d. The Respondent wrongly applied Section 17(2) of the VAT Act, 2013 in disallowing input VAT already supported by the requisite documentation and declared by the supplier. Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 2 of 12 APPELLANT’S CASE 7. The Appellant’s case is based on its Statement of Facts dated 10th September 2025, and is reinforced by Written Submissions dated 21st April, 2026. 8. The Appellant averred that it has complied with Section 17(1) of the VAT Act, 2013, which permits a registered person to deduct input tax “...only to the extent that the supply or importation was acquired to make taxable supplies...” 9. The Appellant asserted that Section 17(2) of the VAT Act stipulates that input VAT is allowable if the purchaser holds the relevant documentation (e.g. tax invoice); and the supplier had declared the same in its VAT return. 10. The Appellant further averred that it holds all requisite documentation, including valid tax invoices from the supplier. Furthermore, the supplier had declared the invoices in its VAT return, albeit as a block figure, not itemized, and the VAT Act does not mandate that declarations must be itemized for the purchaser to claim input VAT. 11. On non-payment to the supplier as a ground for disallowance, the Appellant stated that the Respondent’s justification for disallowing input VAT appears to be that the supplier was not paid by the Appellant. However, Section 17 of the VAT Act does not require actual payment to the supplier as a condition precedent to claiming input VAT. Thus, the Respondent’s reliance on this reasoning is erroneous and contrary to the law. 12. The Appellant posited that the time of supply as per Section 12 of the VAT Act is not tied solely to payment, as the Act provides Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 3 of 12 multiple tax points, including the date of delivery of the goods/services, the date of invoice issuance, the date of partial or full payment, and the date of certification in certain industries. 13. The Appellant stated that, on the genuineness of the transaction and business purpose, the purchases were made to facilitate taxable supplies as required under Section 17(1) of the VAT Act, and there is no dispute that the Appellant is registered for VAT, the purchases were for taxable business activities, the supplier is VAT registered, the supplier issued proper tax invoices; and the supplier declared the transaction in its VAT return. 14. The Appellant asserted that its failure to compel the supplier to amend its return (to itemize the sales) stems from the supplier being under KRA’s “special table” review. The Appellant should not be penalized for this, particularly where all good-faith efforts were made to ensure compliance. 15. On double standards and procedural unfairness, the Appellant stated that the Respondent has acknowledged receipt of the invoice and the transaction in question. However, it now seeks to penalize the Appellant due to administrative lapses on the part of the supplier, over which the Appellant has no control. 16. The Appellant stated that this amounts to a double standard where the supplier is shielded due to its status while the Appellant is unfairly burdened with tax assessments that are legally and commercially unjustified. 17. In its written submissions, the Appellant asserted that it had discharged its burden of proof and that the pendulum shifted to the Respondent. In this regard, the Appellant sought to rely on several Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 4 of 12 precedents including Kanji Vishnjikerai vs Commissioner of Domestic Taxes (Appeal 117 of 2021) (2022) KETAT 1200 (KLR). Appellant’s Prayers 18. The Appellant prayed to the Tribunal for the following orders: - a) The appeal be allowed with costs to the Appellant. b) The Respondent’s confirmation of VAT assessments dated 14th August 2025 be set aside, and the Appellant’s input VAT claims for the relevant period be recognized. c) Any other or further relief as the Tribunal deems fit in the circumstances. RESPONDENT’S CASE 19. The Respondent filed its Statement of Facts dated 15th October 2025 and Written Submissions dated 8th May, 2026 in opposition to the Appeal. 20. The Respondent averred that the basis for its findings and assessment is that the Appellant had been placed in the special table for claiming input from Gifan Enterprises and Young Chande Investments. 21. The Respondent stated that, for the Appellant to be removed from the special table, they were tasked to provide the supporting documents for the claimed input, which they did. However, the transactions were disallowed as per the provisions of Section 17(2) of the VAT Act because there were no corresponding sales by the supplier. Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 5 of 12 22. The Respondent contended that, at the objection stage, the Appellant provided copies of disallowed invoices but failed to provide proof of payment. As provided under Section 17(2) of VAT Act 2013, a taxpayer can claim input tax if they hold the documentation in support of the input claim and the supplier has declared the said sales in their VAT 3 returns. The supplier did not declare those transactions, and therefore the taxpayer’s input tax does not meet the requirements of Section 17(2) of the VAT Act. 23. In its Written Submissions dated 8th May, 2026, the Respondent reiterated the above assertions and submitted that its additional assessments are proper and justified. Respondent’s Prayers 24. The Respondent prayed to the Tribunal for the following orders: - a) The Appeal be dismissed in its entirety. b) The Respondent’s Objection Decision dated 14th August, 2025 be upheld. c) Costs be awarded to the Respondent. ISSUES FOR DETERMINATION 25. The Tribunal having considered the parties' pleadings, submissions and documents filed before it is of the view that the issue that falls for its determination is whether the Respondent’s Objection Decision dated 14th August, 2025 is justified. ANALYSIS AND DETERMINATION Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 6 of 12 26. The Appeal before the Tribunal is premised on the Respondent’s Objection Decision dated 14th August 2025, which confirmed additional VAT assessments of the Appellant of Kshs. 3,917,525.13 inclusive of penalties and interest. 27. The Respondent justified its decision that although the Appellant had grounded its objection that it is in possession of disallowed invoices, its suppliers did not declare those transactions as sales in their VAT 3 returns. The Respondent further justified its decision that the Appellant had not provided proof of payment for the invoices. 28. On its part, the Appellant submitted that it holds all requisite documentation, including valid tax invoices from the supplier. Furthermore, the supplier had declared the invoices in its VAT return, albeit as a block figure, not itemized, and the VAT Act does not mandate that declarations must be itemized for the purchaser to claim input VAT. 29. On non-payment to the supplier as a ground for disallowance, the Appellant submitted that the Respondent’s justification for disallowing input VAT appears to be that the supplier was not paid by the Appellant. However, Section 17 of the VAT Act does not require actual payment to the supplier as a condition precedent to claiming input VAT. 30. Finally, the Appellant submitted that its failure to compel the supplier to amend its return stems from the supplier being under KRA’s “special table” review, and it should not be penalized for this, particularly where all good-faith efforts were made to ensure compliance. Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 7 of 12 31. The Tribunal reviewed rival pleadings and annexures thereto. The Appellant has annexed several invoices and confirmations of payments/ETR receipts from the suppliers, particularly Young Chande Investments and Gifan Enterprises, who are the primary subjects of the instant dispute. The Appellant’s submission that the Respondent has acknowledged receipt of the invoice and transaction in question has also not been rebutted by the Respondent. 32. Equally, the Tribunal notes that there is no rebuttal from the Respondent, on the Appellant’s assertion that its suppliers had been placed on “special table” by the Respondent and this affected its attempts to have the suppliers amend their returns. 33. Section 17 (1) and (2) of the VAT Act on deduction of taxable supplies provides as follows: - 17 (1) Subject to the provisions of this Act and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person in a return for the period, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies. (2) If, at the time when a deduction for input tax would otherwise be allowable under subsection (1)— (a) the person does not hold the documentation referred to in subsection (3), and Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 8 of 12 (b)the registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation: Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred. 34. Although the law requires the supplier to have declared the taxable supplies, in the instant case the Tribunal takes judicial notice of recent decisions on the issue of the “special table”, its subsequent abandonment by the Respondent as an enforcement mechanism. 35. Indeed, it would amount to double standards and procedural unfairness on the part of the Respondent to penalize the Appellant due to administrative lapses on the part of a supplier who had been put on the “special table”, something the Appellant had no control over. 36. Section 59 of the Tax Procedures Act (cap 469B) provides as follows regarding the Appellant’s duty to produce documents and records as may be sought by the Respondent: - (1)For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to – (a) produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 9 of 12 are in the person's custody or under the person's control relating to the tax liability of any person; (b) furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice; or (c) attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person. 37. Section 56 (1) of the Tax Procedures Act (cap 469B), which provides as follows regarding the Appellant’s burden of proof: - In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. 38. Furthermore, Section 30 of the Tax Appeals Tribunal Act (cap 469A) provides as follows on the Appellant’s burden of proof: - In a proceeding before the Tribunal, the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently. 39. The Honourable Tribunal has also previously reiterated the Appellant’s duty to discharge its burden of proof in the first instance. In Abyssinia Iron and Steel Ltd -vs- Commissioner of Customs and Border Control (TAT No. 435 of 2022), the Tribunal held as follows: - Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 10 of 12 The bottom line is that once the Appellant has provided evidence that the Respondent's assessment was wrong, then the Respondent must push back and show that its assessment was not arbitrary, capricious, or imagined. The onus will then shift back to the Appellant once the Respondent has discharged its burden on a balance of convenience to discharge the prima facie case that has been presented by the Respondent. 40. In the instant appeal, and having considered the implications of the “special table” measure on the Appellant and its supplier, the Tribunal is constrained to find and hold that the Appellant reasonably supported its objection under the circumstances, considering that its supplier was on the ‘special table’ and could not file or declare the said invoices in contention in its returns. 41. It would thus be unjust to punish the Appellant and cause it to pay tax based on an event (“special table”) which was created by the Respondent and which made it difficult for its supplier to file its returns, from where the Appellant would have benefited from its rightful input tax deduction. 42. Accordingly, the Tribunal determines that the Respondent sufficiently objected to the assessment under the circumstances it had faced. The Respondent’s Objection Decision dated 14th August, 2025 was therefore not justified. DISPOSITION 43. The upshot of the foregoing analysis is that the Tribunal finds and holds that the Appeal is meritorious and proceeds to issue the following orders: - Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 11 of 12 a. The Appeal be and is hereby allowed. b. The Respondent’s Objection Decision dated 14th August, 2025 be and is hereby set aside. c. The Respondent is hereby directed to review the Appellant’s objection, taking into consideration the documents filed with the Tribunal and any other documents, within 60 days of this judgment, and issue a fresh objection decision. d. Each Party is to bear its own costs. 44. It is so ordered. DATED and DELIVERED at NAIROBI this……10th ………..day of..…July…….. …2026 ..........................………………………. DR. RODNEY O. OLUOCH CHAIRPERSON .…..….……………………. ..….………………………. ABDULLAHI DIRIYE DR. ERICK KOMOLO MEMBER MEMBER Judgement TAT No. E997 of 2025 Kenya Waterproofing Company Limited -vs- Commissioner of Domestic Taxes Page 12 of 12