Kenya: KRA must issue objection decision within 60 days (court decision)
KRA’s failure to issue an objection decision within the stipulated 60 days meant that the objection by the taxpayer had been allowed
Objection by the taxpayer had been allowed
The High Court at Nairobi on 17 July 2023 decided that the Kenya Revenue Authority’s failure to issue an objection decision within the stipulated 60 days meant that the objection by the taxpayer had been allowed. The Tax Appeals Tribunal had therefore erred in dismissing the objection raised by the taxpayer.
The case is: Eastleigh Mall Limited vs Commissioner of Investigations & Enforcement Appeal (No. E0686 of 2020.)
Background
The Kenya Revenue Authority (KRA) in June 2015 assessed the taxpayer’s withholding tax, pay-as-you-earn (PAYE), and corporation tax for the periods 2008 to 2015. The taxpayer objected to the assessment.
The KRA did not respond until two years after the objection was filed. The KRA in April 2017 issued an objection decision confirming the assessment. The taxpayer filed an appeal at the Tax Appeal Tribunal seeking to vacate the KRA’s objection decision on the basis that the objection decision was time barred. The KRA argued that the 60-day timeline was a technicality. The tribunal upheld the KRA’s objection decision and dismissed the appeal. According to the tribunal, the 60 days requirement was a technicality that could be bypassed through discretion as discussions between the parties had the effect of extending time.
The taxpayer appealed to the High Court.
Taxpayer’s appeal
The taxpayer challenged the tribunal decision on grounds that the tribunal erred in failing to consider evidence and the 60-day timeline set out under Section 51 of the Tax Procedures Act, 2015, and by employing the wrong analysis,
KRA’s arguments
While the KRA admitted that the objection decision was issued beyond the 60-day timeline required of it under Section 51(11) of the Tax Procedures Act, it contended that the parties had been engaging in discussions on the subject matter and this therefore had the effect of extending time.
The KRA asked the court to apply the overriding objective under Article 159 of the Constitution of Kenya 2010 and treat the failure to issue an objection decision within the 60-day timeline as a technicality.
Court’s determination
The High Court determined the matter in favour of the taxpayer.
Concerning the validity of the objection decision, the High Court held that the provisions of Section 51 (11) of the Tax Procedures Act are mandatory and that the failure to issue an objection decision within 60 days meant that the objection was allowed.
KPMG observation
The decision by the High Court provides clarity that the Commissioner must issue an objection decision within 60 days. This decision equally signals the likelihood of a similar interpretation in cases when taxpayers fail to lodge an objection within 30 days from the date of the assessment on account of ongoing discussions with the Commissioner.
It is a reprieve for taxpayers who have had assessments hanging over their heads without an objection decision. However, it is important for taxpayers to adhere to timelines even when discussions regarding an assessment are ongoing.
Based on this decision, when a taxpayer does not receive an objection decision within 60 days, the objection is deemed to be allowed in accordance with Section 51(11) of the Tax Procedures Act.
Read a July 2023 report [PDF 318 KB] prepared by the KPMG member firm in Kenya
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