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November 8, 2022

High Court of Kenya will not address grounds for objection not originally presented at the appellate level

  • In this case, the Appellant failed to raise all grounds for objecting to a tax assessment before the Tax Appeals Tribunal.
  • The High Court indicated that its mandate was to rule on whether the decision of the Tax Appeals Tribunal was justified and not to address new grounds for objection. The Court ruled that it could not venture into determining a new matter that was not presented before the Tax Appeals Tribunal.
  • The ruling reflects the importance of including all grounds for objection at the onset of the objection and appeal process.

Executive summary

On 7 October 2022, the High Court of Kenya ruled in favor of the Kenya Revenue Authority (KRA or the Respondent) dismissing an application by a taxpayer (the Appellant) on the right to claim input Value Added Tax (VAT) worth approximately KES249 million (m).

This was based on the fact that the Appellant had not asserted the key grounds of appeal that it presented at the High Court of Kenya at the start of the appeal process at the Tax Appeals Tribunal.

Detailed discussion


The Appellant is a subsidiary of a company that is based in India and was incorporated in Kenya in 2015. The Appellant engages in manufacturing and supply of medical, surgical and laboratory equipment. In 2015, the Appellant entered into a lease agreement with the Government of Kenya via the Ministry of Health (MOH) to provide medical equipment services (MES).

Notably, the Appellant had not registered for the VAT obligation until October 2017 on the grounds that there was lack of clarity on whether the MES contract was subject to VAT. However, as soon as this issue was clarified the Appellant attempted to register but the online registration system failed to add the additional obligation. The KRA then, compelled registration of the Appellant on 9 October 2017 and backdated the registration to 31 May 2015 in line with the period that the Appellant met the registration threshold. Later, the Respondent undertook a tax audit on the Appellant and disallowed input VAT of approx. KES249m. The Respondent then issued a tax demand inclusive of penalties and interest of approx. KES464m.

In 2018, the Appellant dissatisfied with the assessment appealed to the TAT. The TAT in April 2021 ruled in favor of the KRA and informing of the Appellants' decision to file an appeal with the High Court of Kenya.

The Appellant's position

  • The Appellant challenged the decision of the TAT which upheld the KRA's objection decision in declining the input VAT claim of KES249m. In its defense, it highlighted that section 18 of the VAT Act allowed a newly registered taxpayer to claim input VAT that was incurred up to 24 months before its VAT registration.
  • The Appellant further asserted that having been registered for VAT on 9 October 2017, it was entitled to claim input VAT that was incurred up to 24 months preceding the VAT registration. The Appellant also faulted the KRA for backdating the effective date of registration to 31 May 2015.
  • The Appellant also contended that the input VAT under disputed had already been accounted for as output VAT in the books of its supplier and thus the input VAT claim was valid and did not result in loss of tax for the Respondent.
  • The Appellant also asserted that the KRA acted beyond its powers and violated the right to fair administrative action.

The Respondent's position

  • The Respondent asserted that the Appellant had failed to register for VAT and the registration was done in accordance with the law which empowers the KRA to register a taxpayer for VAT if they have not done so.
  • The KRA also asserted that upon registration, the Appellant was obliged to comply with VAT obligations effective as of 31 May 2015.
  • The KRA faulted the Appellant for claiming input VAT from March 2015. The KRA also contended that the issue regarding the claim for input VAT under section 18 of the VAT Act was not canvassed before the TAT and that the Appellant did not make the claim on or before 9 January 2018 or within three months after the addition of the VAT obligation.

Analysis and determination of the High Court of Kenya

The High Court highlighted two matters for analysis and determination of whether:

  • The input VAT claim was time barred.
  • Retrospective registration and application of section 17 of the VAT Act was unconstitutional and unlawful.

After evaluating submissions by both parties, the High Court addressed the following:

Whether input VAT claim for May 2015 to January 2017 was time barred

The Court found:

  • That the pre-requisite documentation for one to claim input VAT was only applicable to a registered VAT person and was not relevant to the Appellant.
  • That a delayed claim was only feasible within six months of the tax period in question in accordance with the provisions of section 17 of the VAT Act and thus the decision by the Respondent as well as TAT was merited.
  • That the Appellant had a chance to present and seek clarification on applicability of section 17 and section 18 of the VAT Act during the TAT appeal stage but did not. This implied that the Appellant could not qualify for application of section 18.
  • The Appellant also failed to convince the TAT that the failure to file a claim was a mere procedural technicality and the failure to observe the statutory timelines therein could not be addressed by Article 159 of the Constitution to override the legal provisions of the VAT Act.

Whether the retrospective registration was constitutional

  • It agreed with the KRA that the Appellant was compelled to register for its VAT obligation from 9 October 2017 in line with the law. This was retrospectively effective from 31 May 2015 when the Appellant first made taxable supplies within the legal VAT registration threshold.
  • The High Court also observed that the Appellant did not question the backdated registration before the TAT. The Appellant had an opportunity to challenge the backdated registration before filing its input VAT claim.
  • The High Court also noted that failure to comply with statutory provisions on timelines is not a procedural technicality. It is a requirement of the law and Article 159 cannot be invoked to cure such an anomaly.


The High Court held that that the Court's duty was to rule whether the decision of the TAT was justified. It could not address a new matter that was not presented at the TAT. Accordingly, the Court declined and dismissed the application by the Applicant.

Based on the Court's ruling, taxpayers should ensure that they properly raise all pertinent matters at the onset of the objection and appeal process.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Ernst & Young Société d'Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York