The Kenya Revenue Authority (KRA) and a leading oil marketing company have returned to the Tax Appeals Tribunal in a renewed legal battle over a disputed tax assessment amounting to Ksh280 million.
The case, which has dragged on for several years, has now been revived after an earlier decision was overturned by the High Court and sent back to the tribunal for fresh determination.
At the heart of the dispute is whether the oil marketer correctly accounted for withholding tax and Value Added Tax (VAT) on various payments made to non-resident service providers.
KRA contends that the firm failed to deduct and remit the taxes as required by law, resulting in underpayment and a significant revenue shortfall.
The taxman is seeking to enforce the Sh280 million tax demand based on its audit findings and interpretation of cross-border tax obligations.
The oil firm, on the other hand, argues that the payments in question do not fall under the categories that attract withholding tax or VAT under the Kenyan tax code.
It maintains that the services rendered were not subject to tax in Kenya due to the nature of the contracts and the location of service provision. The company further claims that KRA misapplied provisions of the Income Tax Act and the VAT Act in its assessment.
The case had earlier been ruled in favor of the oil marketer by the tribunal, but KRA successfully appealed that decision in the High Court. The court ordered a retrial at the tribunal level, noting that certain key aspects of the dispute had not been fully considered in the initial ruling.
As the parties return to the tribunal, the case is expected to set a significant precedent on the tax treatment of international service contracts and the application of withholding tax in Kenya’s oil and gas sector.
It also highlights the increasing scrutiny by KRA of cross-border transactions, especially within capital-intensive industries where foreign technical expertise and services are regularly contracted.
The outcome could have a far-reaching impact on how other companies in the sector structure their operations and comply with local tax obligations. Tribunal proceedings are set to resume later this month, with both parties expected to submit new evidence and arguments.
Written By Ian Maleve
