This alert brings to your attention the High Court’s judgment in the case of Commissioner of Domestic Taxes (KRA) vs W.E.C Lines (K) Limited (Taxpayer) [2022] KEHC 57 (KLR).

The Taxpayer applied to the Kenya Revenue Authority (KRA) for VAT refunds amounting to KES 6,440,624.00 for the period February 2015 to January 2018. The refunds were in respect of services that the Taxpayer provided to WEC BV.

The KRA rejected the application for refund after reviewing the Agency Agreement between the Taxpayer and WEC BV. In rejecting the refund applications, the KRA relied on Regulation No. 13 of the VAT Regulations, 2017 and concluded that the Taxpayer’s supplies did not qualify as exported services and were taxable at 16%.

The Taxpayer appealed to the Tax Appeals Tribunal (Tribunal), which allowed the appeal. The KRA subsequently appealed the Tribunal decision to the High Court. 


The KRA’s grounds of appeal at the High Court

The KRA challenged the Tribunal’s decision on the following grounds:

  1. The Tribunal erred in finding that the VAT Regulations, 2017 were in conflict with the VAT Act, 2013. KRA argued that they complement each other;
  2. The Tribunal failed to appreciate that the services rendered by the Taxpayer of marketing, customer care and post landing services were used and consumed in Kenya;
  3. The Tribunal failed to recognize the tri-partite transaction between the Taxpayer, WEC BV and the importers thereby failing to appreciate that the Taxpayer was offering management and agency services to WEC BV and local services to the importers; and
  4. KRA submitted that while the VAT Regulations, 2017 were not tabled before the National Assembly, they have not been found to be unprocedural and/or illegal and are therefore operational. 


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