This article provides further guidance on the tax dispute resolution process once a taxpayer has undergone a tax audit and responded to KRA’s notice of assessment with a valid objection. After a taxpayer files a valid objection, the KRA must carefully review it and deliver an objection decision within sixty (60) days from the objection’s submission. The KRA’s objection decision can either:
● Fully or partially uphold the objection, or
● Reject it entirely.
In this article, we explore the options taxpayers have in case they are not satisfied with KRA’s objection decision.
You may also read – What to do when you receive an Email or Notice From the Kenya Revenue Authority
Tax Audits and Dispute Resolution – The Kenya Series 1: Managing KRA tax audits
Appeals to the Tax Appeals Tribunal
Taxpayers dissatisfied with objection decisions can appeal to the Tax Appeals Tribunal (TAT), a quasi-judicial body. The TAT was established to hear appeals filed against any tax decision made by the KRA. Appeals to TAT are subject to conditions like payment of undisputed tax. Therefore, the appeal shall only be considered as valid if the taxpayer has paid or entered into an arrangement with the Commissioner to pay the tax which is not in dispute under the assessment at the time of lodging the notice of appeal. The Tribunal is then mandated to hear and determine the tax appeals.
The Appeal Process
An appeal to the TAT must be initiated with a Notice of Appeal within thirty (30) days following the receipt of the Objection Decision.
Within fourteen days after filing the Notice of Appeal, the taxpayer must submit the required number of copies of the Memorandum of Appeal, Statements of Facts, and the tax decision being appealed, as dictated by the Tribunal. The KRA, upon receiving the appeal documents, has thirty (30) days to respond with his statement of facts, the rationale for the original tax decision, and any supporting documents.
The appeal stage is considered a third opportunity for dispute resolution. At this point, both parties may opt for the KRA’s Alternative Dispute Resolution (ADR) Framework to settle the dispute amicably. A successful ADR process results in a written agreement, signed by both parties and validated by the ADR facilitator, which then becomes binding and concludes the dispute.
If the ADR process does not yield an agreement, the dispute can be returned to the Tribunal for a final decision.
Alternative Dispute Resolution (ADR)
ADR provides an alternative to formal legal proceedings, allowing parties to resolve disputes outside the court system. KRA introduced its ADR Framework in 2015. During its inception in 2015, only forty-nine (49) cases were resolved through ADR. However, this number has gradually grown over the years. As per KRA reports, during the half year period July 2021 to December 2021 three hundred and nineteen (319) cases were successfully resolved under ADR.
Effective, 1st July 2023, The Finance Act of 2023 increased the time permitted for settling tax disputes outside of court from 90 days to 120 days. We see this extension as a positive development. It is designed to encourage the resolution of disputes through alternative dispute resolution mechanisms by giving the parties involved more time to resolve their disagreements outside the court system.
Appeals to the High Court and Court of Appeal
Parties can further appeal decisions of TAT to the High Court within 30 days. The High Court, and subsequently the Court of Appeal, become formal stages of tax litigation. It is important to note that appeals to these higher courts are restricted to questions of law.
W&T Advocates LLP are here to assist
Our team at W&T Advocates LLP is experienced in all stages of the tax audit and dispute process. Our approach is designed to help people and organizations address tax audits and disputes through effective strategies for their mitigation, management and prompt resolution.
We can help you to implement consistent and defensible dispute resolution practices and policies as indicated below:
● Responding to letters and notices from the KRA including Requests for Information, Demand Letters and Assessments;
● Assisting in resolving any potential dispute during the audit phase;
● Drafting objection letters and applications for review to the KRA;
● Drafting appeals to the Tax Appeals Tribunal;
● Representation of the appeal at the Tax Appeals Tribunal, High Court and Courts of Appeal. This involves attending mentions and hearing at the Tribunal and Courts to ensure our client’s needs are adequately represented; and
● Engaging in alternative tax dispute resolution mechanisms where appropriate.
Editor’s note: Should you have any questions about this legal alert, please do not hesitate to contact:
Andrew Waithumbi Partner W&T Advocates LLP waithumbi@wtadvocates.com
Timothy Thambu Partner W&T Advocates LLP thambu@wtadvocates.com
