Kenya: Effect of late filing of VAT returns on input VAT claims (High Court decision)
Only the input VAT claims by the taxpayer that were made six months after the end of the tax period can be disallowed.
Input VAT claims by the taxpayer that were made six months after the end of the tax period
The High Court (affirming a lower tribunal decision) clarified the effect of late filing of value added tax (VAT) returns on input VAT claims.
The case is: Highlands Mineral Water Limited vs. Commissioner of Domestic Taxes, Tax Appeal No. E026 of 2020
The Kenya Revenue Authority (KRA) disallowed the taxpayer’s input VAT on late returns filed for the period of January 2014 to April 2017. KRA’s argued that the input VAT was time-barred in accordance with section 17(2) of the VAT law. KRA assessed the taxpayer KES 155,402,525 (approximately $1.4 million), which was the disallowed input VAT, penalties and interest.
The taxpayer opposed KRA’s decision and proceeded to the Tax Appeals Tribunal. The tribunal dismissed the appeal and confirmed KRA’s assessment and demand. The taxpayer then appealed to the High Court.
The High Court determined that the only issue for determination was whether a claim for input VAT would be valid if the claim was made more than six months from the date of supply.
High Court decision
The High Court held in favor of the taxpayer, concluding that the KRA had no power under section 17 of the VAT law to disallow an input VAT claim for the reason of late filing as long as the claim was made within six months after the end of the tax period within which the supply or importation was made. Only the input VAT claims by the taxpayer that were made six months after the end of the tax period can be disallowed irrespective of late filing of the VAT returns.
Read an August 2021 report [PDF 104 KB] prepared by the KPMG member firm in Kenya
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