This monthly update provides a concise overview of recent decisions from the Tax Appeals Tribunal (Tribunal) and the High Court, together with notable administrative developments from the Kenya Revenue Authority (KRA). The cases address important income tax, value added tax (VAT) and procedural issues with practical implications for taxpayers.
A key High Court decision confirmed that, in the lending business, loan principal amounts constitute stock-in-trade rather than capital. Consequently, losses arising from non-recovery of such loans may be deductible as bad debts, provided they meet the criteria set out in the Income Tax Act Guidelines on Allowability of Bad Debts.
This update also highlights a High Court decision which held that KRA cannot invoke agency notices as an enforcement mechanism without first complying with the statutory process, particularly where the underlying tax dispute is under appeal.
On VAT, the Tribunal reaffirmed that KRA cannot compulsorily register a taxpayer and retrospectively impose VAT obligations. Another decision considered the effect of judicial precedent in tax matters, with the Tribunal taking the view that judicial decisions generally operate prospectively unless a court directs otherwise.
In addition to case law, the update outlines recent KRA administrative changes, including the discontinuation of manual declarations for zero-rated exports on iTax and the integration of export data from the Integrated Customs Management System into VAT returns. It also notes the publication of the 8% rates for fringe benefit tax and deemed interest for April to June 2026.
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