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Kenya: High Court upholds imposition of VAT on exported services

28 February 2023
– 3 Minute Read
| Tax


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On 31 January 2023, the High Court, in the case of Mwaura Kabata & 4 Others v National Assembly and 3 Others; 17 Interested Parties, dismissed consolidated petitions challenging the constitutionality of various provisions of the Finance Act, 2022. One of the petitions challenged the imposition of Value Added Tax (VAT) on exported services which the Finance Act, 2022, introduced.


The case originated from five petitions challenging various provisions in the Finance Act 2022, including imposing 16% VAT on exported taxable services excluding business process outsourcing.

Prior to the Finance Act, 2022, exported services were exempt from VAT. Section 30(b) of the Finance Act 2022 deleted paragraph 32 of the First Schedule to the VAT Act 2013 (VAT Act), which exempted exported taxable services from VAT. This meant that effective 01 July 2022, exported services (except for business process outsourcing) were subject to VAT at the standard rate of 16%.

The petitioners argued that the imposition of VAT on exported services in Kenya would result in double taxation since it imposed VAT in the country of origin while the destination principle of international taxation places taxing rights on cross-border supplies in the country where the recipient of the supplies is located. Accordingly, services exported out of Kenya would be subject to VAT both in and outside Kenya, resulting in double taxation. The petitioner also argued that the provision was not subject to public participation and would burden taxpayers heavily. This was because the Finance Bill, 2022 did not contain any proposals on the amendment of paragraph 32 of the First Schedule to the VAT Act. The amendment was introduced during parliamentary proceedings.

The Court condensed the petitions before it and distilled the issue as to whether the National Government’s imposition of the impugned taxes was unconstitutional.

Determination by the High Court

Citing the standing orders of the National Assembly, the Court noted that new amendments could be introduced to a Bill under consideration after the Bill had passed the First Reading. However, the amendments have to be in line with the original intent of the Bill. The challenged provisions relating to the 16% VAT rate were in line with the scope of the Finance Bill, which is to amend tax laws. Because the amendments did not change the original purpose and scope of the Finance Bill, they did not need to be re-submitted for public participation.

The Court held that it could not question the rightness and adequacy of Parliament to impose taxes as the Constitution does not define how high or low taxes should be. This is left to the Legislature to decide. The petitioners raised questions on double taxation and economic interests, which were policy issues and political questions that the Court could not determine due to the doctrine of separation of powers. Imposition of taxes could not be unconstitutional as it is Parliament’s mandate, provided due process is followed.


The amendments introduced through the Finance Act, 2022, including the imposition of VAT on exported services (save for business process outsourcing services), were all constitutional. As such, effective 01 July 2022, providers of exported services were required to charge VAT on their invoices for these services.