[2024] KETAT 1019 (KLR)

Royal Floraholland Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal E207 of 2023) [2024] KETAT 1019 (KLR) (28 June 2024) (Judgment)

Neutral citation: [2024] KETAT 1019 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E207 of 2023

E.N Wafula, Chair, E Ng'ang'a, AK Kiprotich, EN Njeru & M Makau, Members

June 28, 2024

Between

Royal Floraholland Kenya Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a limited liability company incorporated in Kenya and is a subsidiary of the Bloemenveiling Floraholland U.A Group (“Bloemen VFH Group”), a cooperative established in the Netherlands whose business is the sourcing and exportation of flowers from among other regions, Kenya to various overseas buyers. Its principal activity is provision of marketing and support services to Bloemen VFH Group.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Appellant entered into an intercompany agreement with FloraHolland NL to provide marketing logistics and customer support services to FloraHolland NL. The provision of services by the Appellant was deemed to be an export of services in accordance with the Value Added Tax (VAT) Act and as a result the services were zero rated.

4. The Appellant accumulated excess VAT credits as a result of making zero rated supplies. In accordance with Section 17 (5) (a) of the VAT Act, 2013, the Appellant lodged various applications for the refund of the excess VAT credits with the Respondent.

5. The Respondent issued a refund decision on 25th October 2022 which was communicated on iTax.

6. The Appellant filed a manual notice of objection of the rejection of the refund application dated 24th February 2023.

7. Respondent issued an Objection Decision dated 29th March 2023.

8. Dissatisfied with the Respondent’s Objection decision, the Appellant filed the instant Appeal vide a Notice of Appeal dated 28th April 2023.

The Appeal 9. The Appellant based its Appeal on the grounds in the Memorandum of Appeal dated and filed on 12th May 2023 as follows:a.That the refund decisions are null and void because they were not issued within 90 days contrary to the provisions of Section 47 of the TPA and the effect of which is that the refund applications were ascertained and approved by operation of law.b.That the Respondent erred in law by rejecting a refund application on the alleged basis that a breakdown of services was not provided, yet detailed explanations on the nature of the Appellant's business operations were provided.c.That the Respondent erred in law and fact by arriving at the erroneous conclusion, that the Appellant provides agricultural services, which is an exempt service and not zero rated, thereby rejecting the Appellant's refund applications.d.That the Respondent erred by rejecting the refund application on a basis that was contrary to the positions it had adopted in its letter dated 25th March 2022. e.That the Respondent erred by ignoring several binding precedents that confirm that taxpayers providing the same services as the Appellant, provide export services which are zero rated

The Appellant’s Case 10. The Appellant based its case on its;i.Statement of Facts dated and filed on 12th May 2023 together with the documents annexed thereto; andii.The Appellant’s witness statement of Edwin Gakonyo dated 23rd October, 2023 and filed on the 31st October, 2023 that was admitted in evidence under oath on the 23rd November, 2023. iii.Written submissions dated and filed on 7th December 2023.

11. The Appellant's identified and made submissions on the issues as hereunder:-

i. The Refund decisiona are null and void because they were not issued within 90 days contrary to the provisions of Section 47 of the TPA and the effect of which is that the refund applications were ascertained and approved by operation of law. 12. That as indicated in the foregoing clauses, the refund applications for the period June 2019, February 2020 and April 2020 were lodged on 11th July 2019, 10th March 2020 and 18th May 2020, respectively. The refund decisions in respect of these applications were issued on 26th January 2023.

13. That the law applicable for claiming refunds in respect of overpaid taxes is Section 47 of the TPA. Section 47(1) provides that“Where a taxpayer has overpaid a tax under any tax law, the taxpayer may apply to the Commissioner, in the prescribed form-a.to offset the overpaid tax against the taxpayer's future tax liabilities; orb.for a refund of the overpaid tax within five years, or six months in the case of value added tax, after the date on which the tax was overpaid.”

14. That from the date the refund applications were lodged, the Respondent confirmed to the Appellant that the applications were being ascertained in accordance with Section 47 of the TPA through an audit process.

15. That through an amendment introduced in 2022, Section 47(2) of the TPA provides that an application for refund must be determined within 90 days.“The Commissioner shall ascertain and determine an application under subsection(1)within ninety days and where the Commissioner ascertains that there was an overpayment of tax-a.in the case of an application under subsection (1)(a), apply the overpaid tax to such future tax liability; andb.in the case of an application under subsection (1)(b), refund the overpaid tax within a period of two years from the date of the application.3. Where the Commissioner fails to ascertain and determine an application under subsection (1) within ninety days, the same shall be deemed ascertained and approved.”

16. That as above, Section 47(3) of the TPA provides that where the Commissioner fails to ascertain a refund application within 90 days, it shall be deemed ascertained and approved by operation of the law.

17. That the Appellant's refund applications were lodged and acknowledged as received by the Respondent on 11th July 2019, 10th March 2020 and 18th May 2020, that the refund decisions in respect to the applications were issued on 25th October 2022, that this is 2-3 years since the applications were lodged.

18. That that,was clearly more than the 90 days provided for in law and is contrary to the provisions of Section 47(2) of the TPA. That it was an established position of law that in a taxing statute one has to look merely at what is clearly said. That there is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. That this was the view as summarized by Nyamu JA., in Stanbic Bank Kenya Limited v Kenya Revenue Authority CA Civil Appeal No.77 of 2008 [2009]eKLR as follows:“In my interpretation of the law, it is quite evident that I have not sought any assistance from outside a dictionary in ordinary use,Moreover,I have not strained the meaning of the words in order to achieve any particular result. I have simply adopted the ordinary meaning of the words used in the relevant tax statute. This is because as regards tax law the issue of intention or intendment does not arise,If there is any ambiguity, and I did not detect any in my analysis, the same must be construed in favour of the taxpayer."

19. That furthermore, the Appellant argued that the Respondent cannot deviate from the provisions of Section 47(3) of the TPA since the provision is couched in mandatory terms. The court in Equity Group Holdings Limited v Commissioner of Domestic Taxes when analyzing the import of the Section noted as follows:“That the word "shall" when used in a statutory provision imports a form of command or mandate. It is not permissive, it is mandatory. The word 'shall' in it ordinary meaning is a word of command which is normally given a compulsory meaning as it is intended to denote obligation.”

20. That as a result of the Respondent's failure to issue the refund decision within the prescribed timelines, the application for refund is deemed to have been ascertained and approved by operation of law.ii.The Respondent erred in law by rejecting a refund application on the alleged basis that a breakdown of services was not provided, yet detailed explanations on the nature of the Appellant's business operations were provided.

21. The Appellant averred that in the Respondent’s Objection decision, the Respondent found as follows:-“From the March 2020 invoice you had provided we have noted that you recharge all your costs plus a service fee to Flora Holland. The assessing team had vide email dated 10th March 2022 requested for a specific breakdown of your invoices. You responded vide your email dated 17th March 2022 that you do not maintain a breakdown of sales to Bloemenvelling FloraHolland U.A. The information was also not availed at the objection stage hence the Commissioner cannot ascertain the particulars of the services provided and details of amounts invoiced for each service and its implication on your refund application.In light of the foregoing, your objection application has been rejected and the refund decision is hereby upheld”

22. The Appellant averred that the Respondent ignored detailed explanations provided by the Appellant which would have enabled the Respondent "ascertain the particulars of the services provided and details of amounts invoiced for each service and its implication on the refund application"

iii. Details of the Nature of the Appellant's operation that were provided to help ascertain the particulars of services provided are as follows; 23. That the Appellant and FloraHolland NL entered into an intercompany services agreement.Particulars of the intercompany services agreementa.The Appellant was to provide certain services to FloraHolland NL in accordance with the terms and conditions of the agreement.b.The Appellant was to provide the following services to FloraHolland NL:-i.Coordinating and managing relationships between FloraHolland NL and its members and growers in Kenya and offering general market information, advice and consultation to such members and growers.ii.Market and promote FloraHolland NL with a view to procuring and onboarding growers on behalf of the Appellant and enrolling growers to participate in FloraHolland's auctions and direct sales.iii.Identify and source flowers from growers on behalf of FloraHolland NL's buyers and to develop new markets for FloraHolland NL.iv.Undertake quality inspections and to provide logistical support with respect to flower shipments to FloraHolland NL out of Kenya and to report the findings of such inspections to FloraHolland NL.v.Consolidate flower shipments from various growers out of Kenya for export to FloraHolland NL and its buyers as requested by FloraHolland NL from time to time.vi.On behalf of FloraHolland NL, provide executive management services as may be agreed by the parties to FH Consultancy Services Private Limited company, a member of the Royal Flora Holland group of companies incorporated in Ethiopia. In particular, the parties agree that the general manager for Kenya shall serve as the general manager for FH Ethiopia unless otherwise agreed by the Parties; and in Ethiopia.vii.On behalf of FloraHolland NL assist and train growers in Ethiopia on the use of Flora Holland's Floriday platform and provide such other information communication and technology services to FH Ethiopia as may be agreed by the parties from time to time.c.FloraHolland NL's responsibility is to pay a service fee.d.The service fee was determined on a cost-plus billing method. As stated earlier, this means that FloraHolland NL pays for ALL costs incurred in the provision of the services based on the Appellant's cost of providing the services plus 10%.e.The Appellant was engaged as an independent contractor.

24. That pursuant to the provisions of the intercompany services agreement above, the Appellant set up its operations in order to fulfil its mandate under the intercompany services agreement. That the entire business operation of the Appellant is structured to provide the services in the intercompany services agreement.

25. The Appellant set up internal departments that mirrored the services it had contracted to provide under the intercompany services agreement. The structure of the Appellant is as follows:Breakdown of the Appellant's departmentsa.Administration department- undertakes public relations and communication.b.Accounts management-Marketing, customer support and strategic managementc.Global sourcing-quality control, tracking/tracing, documentation and consolidation.d.Post-Harvest-Logistics/cool chain management,e.Financial services - Grower invoicing, credit notes, floriday training for Kenya and Ethiopia.

26. That at the end of the month, the costs incurred by these departments are prepared and consolidated with shared costs such as costs of running the office.

27. The Appellant averred that it would prepare an account of all the costs of running its business and apply the 10% mark up. That it would invoice FloraHolland NL the marked-up cost for settlement.

28. That in the provisions of services to FloraHolland NL, the Appellant contended that it does not invoice for each service that it provides. Instead, FloraHolland NL meets the total operational costs of the Appellant with a mark-up applied.

Breakdown of the services offered. 29. The Appellant averred that the Respondent in paragraph 1 (iii) of the Respondent’s Objection decision alleged that from a review of the intercompany services agreement, it noted that some of the services provided by the Appellant were horticultural/agricultural services and were therefore exempt services under the VAT Act and could not be exported services.

30. That the Respondent did not provide any details of the specific services that it deemed to be horticultural/agricultural services. Instead, it requested the Appellant to provide a breakdown of the services provided to FloraHolland NL. That the Appellant responded providing a detailed breakdown of the business operations of the Appellant and indicated that the Appellant's services were management in nature.

31. The Appellant submitted that it provided services to FloraHolland NL, the breakdown of the services is as indicated in paragraph 3 of the intercompany services agreement.

32. That the Respondent’s decision to reject the refund application on the basis of an alleged lack of provision of the breakdown of services was an utter disregard of the business structure of the Appellant. That as outlined in paragraph 30 above, the business operations of the Appellant are such that all costs running the Appellant are consolidated and marked up and a single invoice shared with FloraHolland NL. That because the Appellant provided services only to the appellant, the invoices do not provide a breakdown of the services provided.

33. That furthermore, the rejection of the refund applications based on the ground of 'failure to provide the breakdown' is not aligned with the law as it is not one of the requirements for compliance with the provisions of the VAT Act and its Regulations. As an exporter of services, the Appellant complied with the provisions of Section 17(2) of the Value Added Tax Regulations, 2017 which provides that:“(2)The documentation relating to a supply required as the proof of an exportation of goods or services shall be-a.a copy of the invoice showing the recipient of the supply to be a person outside Kenya;b.proof of payment for the supply;c.................................d.for services, such other documents as the Commissioner may require as proof that the services had been used or consumed outside Kenya.”

34. The Appellant averred that it provided the Respondent with a copy of the Appellant's invoices during the audit of the refund application.

35. The Appellant stated that the Respondent's request for the breakdown of the services did not fall within the provisions of Regulation 17(2)(d) above as the request by the Respondents was made to confirm whether the services are exempt rather than that "the services had been used or consumed outside Kenya".

36. The Appellant stated that it was cognizant of the fact that pursuant to Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeal Tribunal Act, it bears the burden of proof to prove that the Respondent's assessment is wrong. That indeed the Appellant has discharging its burden of proof, despite the Respondent's assertion that the breakdown of services was not provided.

37. The Appellant stated that it was also aware of the fact that by law it is required to establish a prima facie case in order to discharge its burden of proof. The High Court in Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR observed that:“It is simply fair to place the burden of persuasion on the taxpayer, given that he knows the facts relating to his liability, because the commissioner must rely on circumstantial evidence, most of it coming from the taxpayer and the taxpayer's records. The taxpayer must present a minimum amount of information necessary to support his position. This safety valve seems to place the burden of production on the taxpayer without relieving the Commissioner of the overall burden of proof. The taxpayers evidence must meet this minimum threshold."

38. That the Court further proceeded to hold that:-“The Supreme Court of Canada in Johnston v Minister of National Revenue decided that the onus is on the taxpayer to "demolish the basic fact on which the taxation rested." Again, the Supreme Court of Canada provided guidance on this issue in Hickman Motors Ltd. v Canada in which held that the onus is met when a taxpayer makes out at least a prima facie case. Prima facie is another legal term that literally means "on its face. "To prove a case " on its face" you must provide evidence that, unless rebutted, would prove your position. According to the said decision, a prima facie case is made when the taxpayer can produce unchallenged and uncontradicted evidence. Once the taxpayer has made out a prima facie case to prove the facts, the onus then shifts to the Revenue Authority to rebut the prima facie case. If the Revenue Authority cannot provide any evidence to prove their position, the taxpayer will succeed.”

39. The Appellant posited that as pointed out to the Respondent by the Appellant, the business model of the Appellant does not require it to have a breakdown of the services and bill for each service. That rejecting the applications based on this alone without taking into account the Appellant’s business model is tantamount to the Respondent making business decisions on how the Appellant is supposed to conduct its business. That the Courts have condemned this inclination by the Respondent. In the Supreme Court of India in Hero Cycles (P) Ltd vs Commissioner of Income-tax (Central) Ludhiana [2015] 63 taxmann.com 308[SC] the court made the following important holding:-“We are of the opinion that such an approach is clearly faulty in law and cannot be countenanced.... the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. lt further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Applying the aforesaid ratio to the facts of this."

40. The Appellant submitted that it had discharged its burden of proof and established that its services qualify as zero rated service. Moreover, extensive information, over and above the legal requirement was provided by the Appellant. The intercompany services agreement provided to the Respondent was adequate to enable it to ascertain the particulars of the services provided. The detailed explanation on the Appellant's business structure and the invoices shared were sufficient to enable it to determine the amount invoiced.

iii. The Respondent erred in law and fact by arriving at the erroneous conclusion that the Appellant provides Agricultural Services which is an exempt service not zero rated thereby rejecting the Appellant's refund applications 41. The Appellant averred that the Respondent in its Objection decision noted that the Commissioner's conclusion after the review was;i.The taxpayer's invoices were claimed in time and the input tax claimed resulted from business related purchases. The taxpayer was queried on the reversals done with no credit notes where he gave a clarification.ii.It was ascertained that the taxpayer was involved in exportation.iii.Some of the services offered by Royal Flora Holland Kenya to Bloemen Veiling Fioraholland U.A group were agricultural services classified as exempt services of the 1st schedule part ll paragraph 5 of the VAT Act 2013, and hence do not acquire new status as zero rated when exported.iv.The Commissioner concluded that the refund claims lodged by the taxpayer were not refundable.

42. The Appellant claimed that from the above, the Respondent’s decision to reject the refund application was on the basis that some of the services provided by the Appellant were allegedly agricultural services which are exempt services and thus could not be zero rated.

43. The Appellant posited that the Respondent in its rejection of the refund decisions does not specify which of the above services they deemed to be agricultural services. The Respondent's decision was framed as follows:“Some of the services offered by Royal Flora Holland Kenya to Bloemen Veiling Flora Holland U.A Group were agricultural services classified as exempt services of the 1st schedule part ll paragraph 5 of the VAT Act 2013, and hence do not acquire new status as zero rated when exported,”

44. The Appellant averred that the criteria used by the Respondent to classify some unspecified services as exempt for the purposes of rejecting the refund is plagued with vagueness, and is a mere allegation meant to defeat the Appellant’s otherwise valid claim. That it did not state which services are agricultural nor how those services would be agricultural given that the VAT Act does not define what 'agricultural services' are. That the decision did not provide the Appellant with specific and detailed reasons.

45. The Appellant posited that the Respondent's decision left a lot more questions than answers. That in R vs The Commissioner of Domestic Taxes ex-parte Barclays Bank of Kenya Ltd it was stated“....the duty of the Respondent in assessing tax is to identify transactions or payments that attract tax liability especially where there are objections to such categorizations. Section 35(1)(a) of the Income Tax Act identifies specific types of payments that attract tax, the Respondent is obligated by the law to state with clarity its claim and state how the transaction falls within the terms of the statute. The Respondent cannot exercise its duty like a trawler in the deep seas expecting to catch all the fish by casting its nest wide.The Respondent's decision in this respect falls below this standard and the transactions and payment caught by the decision cannot be said to fall within the statutory definition of the tax."

46. The Appellant asserted that the Respondent's decision can best be described as 'fishing' for its lack of clarity. That the VAT Act has not defined what 'agricultural services' are and this has been the basis of many disputes at the Tribunal and even the High Court. In Republic v Kenya Revenue Authority another Ex-parte Fontana Limited [2014] eKLR the court determined that where a term is not defined, the court must interpret the term in favour of the taxpayer. That the court was dealing with 'horticultural service' which is not defined in the VAT Act. The court determined that:“The next issue for determination is whether the services in question being processing, marketing, packaging, handling, palleting, airlifting, sale by exportation or any other means, transportation and so forth are horticultural services. If the same are horticultural services then it was agreed that they would be exempt from taxation. It was also agreed that the words "horticultural services" are not defined in the VAT Act. However as already appreciated above in Keroche Industries Limited vs. Kenya Revenue Authority&5Others [2007] 2 KLR 240 (supra) taxation can only be done on clear words and cannot be on intendment and that where there are two or more possible meanings, the inclination of the court should be against a construction or interpretation which imposes a burden, tax or duty on the subject. In arriving at the decision that the services in dispute did not fall under the classification of "horticultural services" the Tribunal considered the definition of the word"horticulture" as well as the fact that services relating to exportation of flowers are zero-rated. In other words but without expressly saying so the Tribunal considered the fact that since Parliament specifically selected services relating to exportation of flowers for the purposes of zero-rating impliedly meant that other services relating to processing, marketing, packaging, handling, palleting, airlifting, sale by exportation or any other means, or transportation could not possibly fall under "horticultural services". One does not need to go far to see that the Tribunal was in effect interpreting the intention of the legislature and that in my view was an error. Without expressly defining what was meant by the words "horticultural services" the legislature left the issue open to interpretation and since there could possibly be two interpretations, the law is that the one that favours the taxpayer is to be adopted and in this case it is that services relating to processing, marketing, packaging, handling, palleting, airlifting, sale by exportation or any other means, transportation of horticultural products were 'horticultural services" and Court ought not to dwell on the intendment of the legislation since the law is clear that it is if there is any doubt or ambiguity this defect-if it be in view of the Crown a defect can only be remedied by legislation.”

47. The Appellant urged the Tribunal to discourage the Respondent's conduct to term unspecified services as agricultural services as the law is clear that the Respondent is obligated by law to state with clarity its claim and state how the transaction falls within the terms of the statute. That Appellant stated that the Respondent cannot exercise its duty like a trawler in the deep seas expecting to catch all the fish by casting its nest wide as noted in the Barclays case.

48. The Appellant also noted curiously that the Respondent rejected all the refund applications on the basis that some of the services offered by the Respondent were exempt. It would be expected that the Respondent would have estimated a percentage or specified in the least, of the services it deemed to be agricultural, based on its review, and reject an equivalent proportion of the refunds, if at all it was justified in its erroneous conclusion.

49. The Appellant submitted that the Respondent's decision should be set aside for want of clarity, adequacy and compliance with the requirements of law.

50. The Appellant asserted that without prejudice to its position, even if at all any of the services provided by the Respondent was agricultural, which is denied, the service would still be an exported service, hence still zero rated.

iv. The Respondent erred by rejecting the refund application on a basis that was contrary to the positions it had adopted in its letter dated 25th March 2022 51. To reiterate, the Appellant claimed that the Respondent rejected the refund applications on the basis that a breakdown of sales to FloraHolland NL were also not availed at the objection stage hence the Commissioner could not ascertain the particulars of the services provided and details of amounts invoiced for each service and the implication on the refund application.

52. The Appellant stated that the position above was contrary to the Respondent's own letter dated 25th March 2022 wheren the Respondent stated as follows in paragraph 2 of the letter:-“2. Value Added Tax (VAT)Verification of your records revealed that for the period prior to the finance bill 2021,you were dealing in export of services which were zero rated and thus not chargeable to VAT.Further, an analysis of VAT inputs was done which revealed that most of them were allowable and well supported. However, some inputs such as security services were disallowed since they were incurred for the expatriate's staff personal residences. Other prohibited inputs such as maintenance and repairs of saloon cars were disallowed pursuant to Section 17 of the VAT Act, 2013. The amounts been disallowed and VAT of Ksh 1405,006 computed....................However, it was noted that you are in a credit position and has a refund application pending processing, the amounts disallowed of Ksh 1,105,006 shall be used to reduce the VAT credit amounting to Kshs 12,648,481 as at 28/02/2022. ”

53. That in the communication, the Respondent acknowledged that the Appellant was dealing in export of services which were zero rated and thus not chargeable to VAT. That nowhere did the Respondent allege that some of the inputs claimed related to “agricultural services” which are exempt.The Appellant claimed that the new allegation was an afterthought geared towards defeating the Appellant’s valid claim.

54. That the letter clearly described the Respondent’s position on the VAT status of the Appellant prior to the rejection of the refund application, That it would seem that the Respondent had no issue with the VAT of the Appellant for the purposes of accruing tax credits but the moment the Appellant made an application to get its money's worth, the Respondent created a reason merely to justify denying the Appellant's refund applications.

55. That the said letter was also very categorical that the VAT inputs were well supported by the documentation provided by the Appellant. The Respondent then proceeded to reduce the tax credits against the assessed amount.

56. That as a result of the representations made by the Respondent vide the said letter, the Appellant relied on the same to conduct its business on the premise that the refunds were going to be approved by the Respondent.

57. That the Respondent's decision to depart from the position that it intimated to the Appellant is therefore contrary to the Appellant's legitimate expectation. According to De Smith, Woolf & Jowell, “Judicial Review of Administrative Action" 6thEdn. Sweet & Maxwell page 609 quoted in Republic v Kenya Revenue Authority Ex-Parte:Cosmos Limited [2016] eKLR:“A legitimate expectation arises where a person responsible for taking a decision has induced in someone a reasonable expectation that he will receive or retain a benefit of advantage. It is a basic principle of fairness that legitimate expectations ought not to be thwarted. The protection of legitimate expectations is at the root of the constitutional principle of the rule of law, which requires predictability and certainty in government's dealings with the public."

58. That in determining the existence of legitimate expectation, the court in Republic v Principal Secretary, Ministry of Mining Ex-parte Airbus Helicopters Southern Africa (PTY) Ltd [2017]eKLR cited R (Bibi) vs. Newham London Borough Council [2001] EWCA Civ 607 [2002] 1 WLR 237 at [19]to hold that existence of legitimate expectation involves the following questions:“In all legitimate expectation cases, whether substantive or procedural, three practical questions rise, the first question is to what has the public authority, whether by practice or by promise, committed itself to; the second is whether the authority has acted or proposes to act unlawfully in relation to its commitment; the third is what the court should do."

59. The Appellant asserted that by confirming in its notice of assessment that a review of the Appellant's services had proved that all the Appellant's services were zero rated and that the documentation that the Appellant kept and provided were in order, the Respondent made a representation that it is now bound to keep. The Appellant further submitted that the representations made by the Respondent were actually the correct and lawful position, and the Respondent cannot reinvent its position to suit its intention to avoid making refund payments.

60. The Appellant asserted that for the foregoing reasons the Respondent had by its utterances in writing given it an enforceable legitimate expectation that all its services in issue are zero rated services.

v. The Respondent erred by ignoring several binding precedents that confirm that taxpayers providing the same services as the Appellant, provide export services which are zero rated 61. That the nature of the Respondent's services had been the subject of several disputes before the Tribunal as well as the courts. As a matter of fact, a similar dispute on the same issues between the same parties herein, was already determined in favour of the Appellant in Royal FloraHolland Kenya Limited (formerly F.H.Services Kenya Limited) vs. the Commissioner of Domestic Taxes, TAT appeal no 6 of 2012 where the Tribunal had an opportunity to review the Appellant’s service and decided that:“_ our understanding of the meaning of the words "services exported outside Kenya" which must be interpreted in tandem with meaning the words "for use or consumption outside Kenya" where the words "consumption or use" refer to the final consumer, whose jurisdiction has the taxing rights, in this case, Holland. Moreover, the benefits the services the Appellant offers does not accrue in Kenya but accrues outside Kenya for the services offered by the Appellant are offered Flora Holland under the agreement and to other final consumers any,located in Holland when the Appellant:Coordinates and offers general market information about flowers to the members and Kenyan growers; Sources for growers to supply flowers for export Holland;

Provides quality information and logistical support flower shipment out of Kenya to the Netherlands; and Provides tracking and tracing system for flower shipment from Kenya to Holland.That it is for this reason that it is very clear in our minds that these services and all services that accompany and occasion exportation are provided for the sole purpose of benefiting the final consumer who is not in Kenya, the origin jurisdiction, but the final consumer who is located in the destination jurisdiction and therefore provided for use or consumption outside Kenya."[Emphasis added]

62. That the Honourable Tribunal had the opportunity to examine the services provided by the Appellant and noted that the services were exported services. That on this basis, the services are zero rated contrary to the Respondent's assertion. The Appellant submitted that the Respondent, in this new assessment, was making an attempt to circumvent the earlier decision and come up with fresh and innovative reasons to defeat the Appellant's lawful VAT refunds claim.

63. That given the decision above was not challenged by the Respondent, the Respondent should follow the precedent set by the Tribunal that all of the services provided by the Appellant are exported services hence zero rated.

Appellant’s Prayers 64. The Appellant prayed for the following orders:a.This Appeal be allowed.b.The Respondent's three (3) rejection notices dated 25 October 2022 rejecting the refund for the sum of Kshs. 649,963 be set aside in their entirety.c.The Respondent be ordered to process and pay the Appellant's refunds within 30 days of the date of the Tribunal's judgement.d.Any other orders that the Tribunal may deem fit.

Respondent’s Case 65. The Respondent’s case is premised on its Statement of Facts dated and filed on 14th June 2023.

66. That the Appellant accumulated excess VAT credits as a result of making zero rated supplies. In accordance with Section 17 (5) (a) of the VAT Act, 2013, the Appellant lodged various applications for refund of the excess VAT credits with the Respondent.

67. That the Respondent conducted several tests upon receiving the application for refund as follows:i.Verification of the purchase invoices/input tax claimed: to ascertain if they were proper tax invoices and if they were claimed within time.ii.Verification of the export data: to ascertain if there were actual exports.iii.Ascertaining whether the taxpayer was involved in exportation.iv.A breakdown of the services offered by the taxpayer were verified to ascertain if all of the services rendered were zero-rated.

68. The Respondent averred that upon conclusion of the verification process it came up with a conclusion as follows:i.The Appellant claimed the invoices within and the input tax claimed resulted from business related purchases. The Respondent queried reversals done with no credit notes which the Appellant clarified.ii.It was ascertained that the Appellant was involved in exportationiii.Some of the services offered by Royal Flora Holland Kenya to Bloemen Veiling Floraholland U.A group were agricultural services classified as exempt services of the 1st schedule part II paragraph 5 of the VAT Act 2013, and hence do not acquire new status as zero rated when exported.iv.The Respondent concluded that the refund claims lodged by the Appellant were not refundable.

69. The Respondent noted that the Appellant's records were well maintained however the question raised on the breakdown of services offered by the Appellant to Bloemen VFH Group was not satisfactorily answered.

70. That on several occasions, the Respondent requested for documents in support of the application for refund. The Respondent requested for a breakdown of the invoices raised by the Appellant to the Bloemen VFH Group. The Respondent averred that the Appellant communicated that it did not maintain a breakdown of sales to the Bloemen VFH Group.

71. The Respondent averred that it issued a refund decision on 25th October 2022 which was communicated on the iTax.

72. The Appellant filed a manual notice of objection of the rejection of the refund application dated 24th February 2023 and the Respondent issued an Objection decision dated 29th March 2023

73. On whether the Respondent issued the refund decision within the statutory timelines, the Respondent averred that the Appellant lodged various applications for refund of excess VAT credits resulting from making zero rated supplies and alleged that the refund decision, was not issued with 90 days contrary to Section 47 of the Tax Procedures Act. That the said Section clearly provides the procedure for claiming refunds in respect to overpaid taxes.

74. That however this is not the fact in the instant case, the Appellant's VAT refund applications were as a result of alleged zero rated supplies and not overpaid taxes. That the provision is therefore not applicable in the case herein.

75. The Respondent averred that the Appellant was misguided in relying on Section 47 of the Tax Procedures Act, which related to refund of overpaid taxes. That the correct provision, which deals with zero rated supplies, is Section 47B and is the provision under which the refund applications before the Commissioner were made.

76. The Respondent averred that it was carrying out an audit of the operations and refund applications of the Appellant as a whole. The Respondent carried an audit for the period 2015 to 2018, which later extended to the year 2021.

77. The Respondent averred that they were inconsistent communication with the Appellant on the progress of the refund process, which is evident from the email correspondences.

78. That on 25th October 2022, the Respondent upon conclusion of the audit process issued a refund decision.

79. The Respondent averred that it issued its refund decision on 25th October 2022 which was less than 30 days after review of the documents provided by the Appellant on 26th September, 2022. The refund decision was therefore issued within time rejecting the refund claim.

80. The Respondent claimed that the Appellant proceeded to object to the rejection of the VAT refund applications on 24th February 2023 upon a demand for the taxes being raised on the iTax ledger.

81. The Respondent reviewed the documents and issued an objection decision on 29th March 2023 which was within statutory timelines.

82. The Respondent averred that it issued the Appellant with the objection decision within time.

83. On whether the Respondent was justified in law in rejecting the application for refund the Respondent averred that the rejection related to earlier rejections where reasons were clearly spelt out.

84. The Respondent rejected the Appellant’s refund application on the basis that some of the services offered by Appellant to Bloemen VFH Group were agricultural services classified as exempt services of the 1st Schedule Part II Paragraph 5 of the VAT Act 2013, and hence do not acquire new status as zero rated when exported.

85. The Respondent averred that the Appellant stated that the principal activity of the parent entity was sourcing and exportation of flowers from Kenya to various overseas buyers. This is in line with the Appellant's third principal activity where it identifies and sources flowers from growers on behalf of Bloemen VFH Group. The activity of sourcing and exporting flowers is an entirely agricultural service which is exempt.

86. The Respondent relied on the case of Royal FloraHolland Kenya Limited (formerly F.H.Services Kenya Limited) vs the Commissioner of Domestic Taxes, TAT Appeal No. 6 of 2012, where the principal activities of Royal FloraHolland Kenya Limited were listed as;i.Coordinating and managing relationships: this service entails coordination and managing relationships between the Appellant and its members and growers in Kenya and offering general market information and consultation to such members and growers.ii.Marketing and promotion: this entails sourcing for growers to supply flowers. These growers are to be found within the East African region and especially Kenya.iii.Quality inspections and logistical support, this entails providing quality inspection and logistical support to flower shipments to the Appellant out of Kenya.iv.Tracking and tracing system for flower shipments etc., the Appellant is in the process of developing a tracking system intended to keep track of shipments from the growers' farms to the time the flowers are sold in Holland.

87. That in the Contract between Royal Flora Kenya Limited and Flora Holland under Clause 3. 2 provides that:-“In performing the Services, FH Kenya shall comply with such reasonable instruction given by Flora Holland and shall not:3. 2.1pledge the credit of Flora Holland in any way; or3. 2.2delegate or sub-contract any of its duties or obligations under this Agreement without the consent of Flora Holland.”

88. That in consideration of the Appellant providing the Services, Bloemen VFH Group shall pay the Service Fee as follows:-“The Service Fee shall be determined on a cost-plus billing method. Flora Holland shall pay for all costs relating to the provision of the Services received based on FH Kenya's cost of providing the Services plus ten percent (10%) ("Service Fee"). The Parties will on an annual basis review the Service Fee to determine the increase (if any) in the Service Fee for the successive year.”

89. That from the above it is clear that the Appellant cannot delegate any of the duties without the consent of Blomen VFH Group.

90. The Respondent averred that it rejected the refund application on the basis that some of the services offered by the Appellant to Bloemen VFH Group are agricultural services classified as exempt services of the 1st Schedule Part II Paragraph 5 of the VAT Act 2013, and hence do not acquire new status as zero rated when exported.

91. That on 10th March 2022, the Respondent, requested for a breakdown of the invoices raised by the Appellant to the Bloemen VFH Group. On 17th March 2022, the Appellant communicated that they do not maintain a breakdown of sales to the Bloeman VFH Group.

92. The Respondent examined the documents and information provided by the Appellant and in absence of any evidence to the contrary, the services provided by the Appellant specified were categorized as agricultural services as per clause 2 of the Contract between the Appellant and Bloeman VFH Group.

93. The Respondent averred that the services offered by the Appellant were offered in the year 2019 and 2020 and therefore the law applicable is the VAT Act 2013 that provided that exported services are zero rated.

94. That Section 17(5)of the VAT Act provides that;“Where the amount of input tax that may be deducted by a registered person under subsection (1) in respect of a tax period exceeds the amount of output tax due for the period, the amount of the excess shall be carried forward as input tax deductible in the next tax period:Provided that any such excess shall be paid to the registered person by the Commissioner where-(a)such excess arises from making zero rated supplies;"

95. The Respondent averred that for an amount to become refundable it must meet two criteria. First, they must be in excess and second; zero rated. That the refund claimed by the Appellant were in excess and exempt. That they were not zero rated and therefore not refundable.

96. That Section 31(1c) of the Tax Procedure Act provides that:“Subject to this section, the Commissioner may amend an assessment (referred to in this section as the "original assessment") by making alterations or additions,from the available information and to the best of the Commissioner's judgement,to the original assessment of a taxpayer for a reporting period to ensure that-(c) in any other case, the taxpayer is liable for the correct amount oftax payable in respect of the reporting period to which the original assessment relates.”

97. The Respondent issued a letter dated 25th March 2022 and subsequently, the Appellant provided further and additional information for consideration. The Respondent established that some of the services provided by the Appellant were agricultural and therefore exempt. The Respondent was therefore within its mandate to amend an assessment made earlier.

98. That Regulation 13(2d)of the Value Added Tax Regulations 2017 provides that:-“The documentation relating to a supply required as the proof of an exportation of goods or services shall be-a.a copy of the invoice showing the recipient of the supply to be a person outside Kenya;b.proof of payment for the supply;c.......d.for services, such other documents as the Commissioner may require as ptoof that the service had been used or consumed outside Kenya”

99. On whether the Appellant discharged its burden of proof the Respondent averred that it issued the refund decision with the information provided and was limited to the available information at the time.

100. That in the email correspondences, the Appellant stated that it did not maintain a breakdown of sales to Bloemenvelling Flora Holland U.A, therefore the Respondent relied on the information provided.

101. That Section 59 of the Tax Procedure Act provides as follows:“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 offcer 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 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;”

102. That the aforementioned Regulation and Section allowed the Respondent to require a taxpayer, such as the Appellant herein, to provide such other documents as the Respondent may require.

103. The Respondent requested for a breakdown of the services the Appellant provided to the Bloeman VFH Group and that the Respondent was within its mandate to request the Appellant to provide a breakdown of the services for further consideration.

104. That Section 51(10) of the Tax Procedure Act provides that:“An objection decision shall include a statement of findings on the material facts and the reasons for the decision."

105. That the Respondent at page 7 of the Objection decision dated 29th March 2023 provided for the statement of findings upon review of grounds of objection and evidence adduced. Further at pages 7, 8 and 9 of the said decision, the Respondent outlined the reasons for its decision on each of the grounds of the Objection raised by the Appellant.

106. The Respondent averred that exempt services of the 1st Schedule Part II Paragraph 5 of the VAT Act 2013 do not acquire a new status of zero rate until verification whether those services met the requirements specified under Regulation 13 of the VAT Regulations 2013.

107. That Section 24(2) of the Tax Procedure Act provides that:-“The Commissioner shall not be bound by a tax return or information provided by,or on behalf of,a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner."

108. The Respondent averred that it considered all the documents and information provided by the Appellant. That the Appellant did not provide all documents as requested and therefore the Respondent issued the decision with the information provided and was limited to available information at the time.

109. The Respondent averred that the Appellant cannot rely on the case of Royal FloraHolland Kenya Limited V Commissioner of Domestic Taxes TAT 6 of 2012 because the tax law application on exported agricultural services has changed and the principal activities in the two cases are different. In the instant case, there is inclusion of costs plus markup remuneration that was not listed in the former case.

110. The Respondent averred that the Appeal is incompetent and bad in law for failure to comply with the mandatory statutory timelines and provisions.

Respondent’s Prayers 111. The Respondent prays that the Tribunal:a.Dismisses this Appeal with costs to the Respondentb.Upholds the Respondent’s Objection decision dated 29th March 2023.

Issues for Determination 112. The Tribunal having evaluated the pleadings and submissions of the parties is of the view that there are two issues that call for its determination;a.Whether the Appellant’s refund application was allowed by operation of the lawb.Whether the Respondent’s decision to reject the refund claim was justified.

Analysis and Findings 113. The Tribunal having determined the issue falling for its determination proceeds to analyse the same as hereunder.

a. Whether the Appellant’s refund application was allowed by operation of the law 114. The Appellant submitted that it lodged various applications for refund of excess VAT credits resulting from making zero rated supplies. The Appellant averred that the law applicable for claiming refunds in respect of overpaid taxes is Section 47 of the TPA. The Section 47 (1) provides that“Where a taxpayer has overpaid tax under any tax law, the taxpayer may apply to the Commissioner, in the prescribed form-a.to offset the overpaid tax against the taxpayer’s future tax liabilities orb.for a refund of the overpaid tax within five years, or six months in the case of value added tax, after the date on which the tax was overpaid.”

115. The Appellant alleged that the refund decision was not issued within the 90 days contrary to Section 47 of the Tax Procedure Act while the Respondent stated that the said Section provided for a procedure for claiming refunds in respect to overpaid taxes.

116. The Respondent further submitted that the Appellant’s VAT refund applications were a result of alleged zero rated supplies and not overpaid taxes and therefore the provision was not applicable in the case herein.

117. The Respondent averred that the Appellant was misguided in relying on Section 47 of the Tax Procedure Act, which relates to refund of overpaid taxes. That the correct provision which deals with zero rated supplies is Section 47B and is the provision under which the refund applications before the Commissioner were made and that further, this provision does not have a timeline for making refund decisions.

118. Section 47 B of the Tax Procedure Act provides as follows:“47 BRefund of tax paid on exempt or zero- rated supply:The Commissioner may upon approval by the Cabinet Secretary, refund a tax paid in error in any case where the supply is exempt or zero-rated under the Act but such exemption or the zero rating was not processed within the specified period due to circumstances beyond the control of the taxpayer.”

119. The Tribunal notes that the under Section 47 (5) of the TPA the Respondent may for purposes of ascertaining the validity of an application under subsection (1) subject the application to an audit. It provides as thus:“Where the Commissioner fails to ascertain and determine an application under the subsection (1) within ninety days the same shall be deemed ascertained and approved. “

120. The Tribunal further notes that the Respondent carried out an audit of the operations of the refund application of the Appellant as a whole for the periods 2015 to 2018 which later extended to the year 2021.

121. That Tribunal observes that the Respondent consistently communicated with the Appellant on the progress of the refund process and upon its conclusion on 25th October 2022, the Respondent issued its refund decision.

122. The refund decision was made on the 25th October 2022 after the review of the documents provided by the Appellant on 26th September, 2022 which was less than 30 days and therefore within the statutory timelines.

123. The Tribunal therefore finds that the Respondent issued the refund decision within the statutory times lines according to Section 47 of TPA and it therefore follows that the refund application was allowed by operation of the law

b. Whether the Respondent’s decision to reject the refund claim was justified 124. The crux of this dispute is the Respondent’s decision to reject the Appellant’s VAT refund claim lodged on 24th February, 2023. It is the Respondent’s case that it rejected the refund claim by the Appellant as some of its supplies were agricultural services which are exempt supplies.

125. The Respondent averred that the principal activity of the parent entity was sourcing and exportation of flowers from Kenya to various overseas buyers which was in line with the Appellant’s third principal activity where it identifies and sources flowers from growers on behalf of Bloemen VFH Group. The Respondent averred that the activity of sourcing and exporting flowers is an entirely agricultural service which is exempt.

126. While justifying rejecting the Appellant’s refund claim vide its Objection decision dated 29th March, 2023, the Respondent relied on Paragraph 5 of the First Schedule Part II of the VAT Act 2013 which classifies agricultural services as exempt goods.

127. It is the Appellant’s case that it provides services of identifying growers and sourcing flowers from these growers on behalf of Bloemen Veiling Floraholland U.A group. These services involved first to understand what specific species of flowers are needed at a particular time upon request, second looking for and identifying particular growers of that specific species of flowers and third connecting the particular grower to Bloemen Veiling FloraHolland U.A group. Finally, the Appellant at the time the grower is exporting the flowers, simply double checks to ensure that the species and quality of the flowers is what is requested.

128. It was further the contention of the Respondent that from the listed activities in the contract between the Appellant and Bloemen VFH group, they were fundamentally different from the principal activities and the earlier contract in the case of Royal FloraHolland Kenya ltd (formerly F.H Services Kenya Ltd) v Commissioner of Domestic taxes, TAT Appeal No 2 of 2012. The Respondent contended that these activities were inclusive of cost plus mark-up renumeration that was not listed in the earlier case.

129. The Tribunal perused through the pleadings and noted that the Appellant attached the “Intercompany services agreement” between Royal Floraholland Kenya Limited and Bloemenveiling Floraholland U.A group and whose address indicated that it was based in the Netherlands with a registered office in Legmeerdijik 313 1431 GB Aalsmeer (FloraHolland). The Agreement stated in part as follows;“Under Clause 3 & 4”3. FH Kenya Responsibilites3. 1.FH Kenya shall provide the following Services to Flora Holland:3. 1.1. coordinating and managing relationships between Flora Holland and its members and growers in Kenya and offering general market information, advice and consultation to such members and growers; 3. 1.2 market and promote Flora Holland with a view to procuring and onboarding growers on behalf of Flora Holland in Kenya and enrolling growers to participate in Flora Holland's auctions and direct sales;3. 1.3. identify and source flowers from growers on behalf of Flora Holland's buyers and to develop new markets for Flora Holland;3. 1.4. undertake quality inspections and provide logistical support with respect to flower shipments to Flora Holland out of Kenya and to report the findings of such inspections to Flora Holland;3. 1.5. consolidate flower shipments from various growers out of Kenya for export to Flora Holland and its buyers, as requested by Flora Holland from time to time;3. 1.6. on behalf of Flora Holland,provide such executive management services as may be agreed by the Parties to FH Consultancy Services Private Limited Company, a member of the Royal Flora Holland group of companies incorporated in Ethiopia ("FH Ethiopia"). In particular, the Parties agree that the general manager for Kenya shall serve as the general manager for FH Ethiopia unless otherwise agreed by the Parties; and3. 1.7. on behalf of Flora Holland assist and train growers in Ethiopia on the use of Flora Holland's Floriday® platform and provide such other information communication and technology services to FH Ethiopia as may be agreed by the Parties from time to time.3. 2.In performing the Services, FH Kenya shall comply with such reasonable instruction given by Flora Holland and shall not:3. 2.1. pledge the credit of Flora Holland in any way; or3. 2.2. delegate or sub-contract any of its duties or obligations under this Agreement without the consent of Flora Holland.3. 3.FH Kenya shall obtain and maintain in force all licences, permissions, authorisations, consents and permits (statutory, regulatory, contractual or otherwise) needed to perform the Services in accordance with this Agreement.3. 4.FH Kenya shall use reasonable endeavours to meet any performance dates agreed with Flora Holland, but any such dates shall be estimates only and time for performance by FH Kenya shall not be of the essence of this Agreement.3. 5.FH Kenya shall maintain records and accounts of its provision of the Services and shall,as soon as practicable following a request by Flora Holland, provide Flora Holland with such information derived from those records and accounts that Flora Holland may reasonably request for the purposes of its internal bookkeeping and accounting operations.4. Flora Holland Responsibilities4. 1.Flora Holland shall:4. 1.1. pay the Service Fee;4. 1.2. co-operate with FH Kenya in all matters relating to the Services and provide it with such information and assistance as FH Kenya shall reasonably require to enable it to provide the Services n accordance with this Agreement;4. 1.3. provide to FH Kenya in a timely manner all documents, information, items and materials in any form required or otherwise reasonably requiredby FH Kenya in connection with the Services and ensure that they are accurate and complete in all material respects; and4. 1.4. obtain and maintain all necessary licences and consents and comply with all relevant legislation as required to enable FH Kenya to provide the Services in accordance with this Agreement.4. 2.Flora Holland shall not delegate any of its duties or obligations under this Agreement without the consent of FH Kenya.”

130. The Tribunal observes that the Appellant in this case provided clear evidence in form of an Agreement to demonstrate that it was providing services to Bloemenveiling Floraholland U.A group which is a company based in Netherlands. The Respondent on the other hand did not provide any evidence to demonstrate that the Appellant provided any other services to local companies.

131. The Tribunal is guided by Section 2 of the VAT Act which defines exported services as follows;“service exported out of Kenya” means a service provided for use or consumption outside Kenya”

132. Going by the definition of exported services, the place of performance of the services is not relevant. This was the finding in Commissioner of Domestic Taxes vs. Total Touch Cargo Holland [2018] eKLR where it was held that:“A clear reading of this provision is that for a service to be deemed an “exported service”, it matters not whether that service was performed in Kenya or outside Kenya. The determining factor is the location where that service is to be finally used or consumed. Therefore, an exported service will be one which is provided for use or consumption outside Kenya.”

133. Further, to determine the place of consumption, the court in Total Touch Cargo Holland applied its mind to the question of the purpose of the services and who ultimately enjoyed the same and stated as thus:“It is not in any dispute that the purpose of the services provided by KAHL was to ensure that the Respondent delivered the horticultural produce and flowers to their customers in Europe a fresh state. The Respondent on whose behalf the services were being performed was also based outside Kenya (in Holland). It is clear therefore that the services being provided by KAHL were consumed by the Respondent (a foreign based company) and said services were ultimately enjoyed or used by the buyers (consumers) of the horticultural produce and flowers who were also outside of Kenya.”

134. In the present case the Appellant has described in detail the purpose of its services and demonstrated that the consumer of its serviced is Bloemenveiling Floraholland U.A group who is based in Netherlands. The services rendered by the Appellant cannot be conceivably deemed to be in the nature of agricultural services.

135. The Tribunal notes that if services are provided in Kenya it places the burden on the place of consumption even though the payment may have been made by a non-resident. The Tribunal observes that in the instant case the consumption of the services is by Bloemen FloraHolland U.A group which is in Netherlands.

136. The Tribunal notes that it is clear from the agreement that the services performed by the Appellant are for use and consumption by Bloemen FloraHolland U.A, outside Kenya, as required by Section 2 of the VAT Act, and should therefore be subject to VAT at the zero rate (0%).

137. Consequently, the Tribunal finds that the Respondent was not justified in rejecting the Appellant’s VAT refund claim.

Final Decision 138. The upshot of the foregoing is that the Tribunal finds that the Appeal is meritorious and consequently makes the following orders; -i.The Appeal be and is hereby allowed.ii.The Respondent’s Objection decision dated 29th March 2023 be and is hereby set aside.iii.Each party to bear its own costs.

139. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF JUNE, 2024. ERIC NYONGESA WAFULA - CHAIRMANEUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPTROTICH - MEMBERELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBER