KRA WINS FIRST ROUND OF OVER 2B TAX FIGHT AFTER SERVING AN INCOMPLETE OBJECTION DECISION
Review of Tax Appeal No. E789 of 2023: Weihai International Economic & Technical Cooperative Company Limited (Weihai)-Versus-The Commissioner of Domestic Taxes (KRA) [2025]
The Kenya Revenue Authority has won a fight of over Ksh. 2,000,000,000.00 against a subsidiary of a Chinese company in tax claim for both corporate tax, VAT, withholding tax and PAYE. In Tax Appeal No. E789 of 2023 before the Tax Appeal Tribunal in Nairobi. Weihai moved the Tribunal in an Appeal challenging the Decision of the Commissioner dated 27th July, 2023 and received on 28th July, 2023 upholding the assessment dated 18th April, 2023 of Corporate Income Tax, VAT, Withholding Tax and Pay-As-You-Earn to the principal amount of Ksh. 1,907,220,889.00.
Weihai argued that KRA began an audit process over the its business activities in the year 2022 for the period between 2017 to 2021. KRA then communicated its pre-assessment tax audit finding to weihai vide a letter dated 17th January, 2023 titled “Tax Audit Preliminary Findings 2017- 2021.”
On 13th March, 2023, Weihai responded to the Pre-Assessment Notice through a letter comprehensively addressing each of the issues raised by KRA and denying any additional taxes alleged to be due and payable.
Through a letter dated 18th April 2023, KRA informed Weihai that the Audit process had been concluded and it raised additional assessments for Corporation Tax, Value Added Tax, Pay-As-You-Earn, and Withholding income Tax for the fiscal years 2017-2021 in the aggregate amount of Ksh. 2,460,966,251.00 inclusive of penalties and interest.
Aggrieved with the entirety of the Assessment dated 18th April 2023, Weihai objected to KRA’s assessment vide a letter of Objection dated 10th May 2023. KRA requested additional information from the Appellant which necessitated a further Objection dated 29th May 2023.
On 28th July 2023, after considering Weihai Objections, KRA communicated its final Objection Decision dated 27th July 2023. Weihai argued that this decision was incomplete, inadequate and incomprehensible as it contained missing pages (i.e the decision contained odd pages 1,3,5,7… with no even pages 2,4,6,8 ….).
Being dissatisfied with KRA’s incomplete Objection Decision dated 27th July 2023, Weihai invoked the Tribunal’s jurisdiction by filing a Notice of Appeal dated 24th August 2023 and filed on 25th August 2023. Weihai further filed a Memorandum of Appeal dated 9th November 2023 which raised among others the following grounds:
That the purported Objection Decision dated 27th July 2023 was not a legally valid Objection Decision as it contained missing pages hence fell short of the dictates of sections 51(10) of the Tax Procedures Act which require the decision to have a statement of findings on the material facts and the reasons for the decision.
That no legally valid Objection Decision was made by KRA within the statutory period, and thus Weihai’s Objection dated 29th May 2023 was automatically allowed by operation of statute.
On realizing their mistake, KRA went ahead to serve a complete objection decision with all the pages on 3rd October 2023 Being 127 days from 29th May 2023 when KRA received Weihai’s letter of Objection. As per Section 51 (11) of the Tax Procedure Act, KRA is required to issue a valid objection decision within 60 days of receipt of objection from a tax payer. Having issued a complete objection decision outside the statutory timeline, Weihai argued that their objection had automatically been allow by operation of law. The Tribunal however did not look into the service of the complete decision but held that even though KRA’s objection decision served on 28th July 2024 had missing pages, it was served on time and had both statement of facts and final decision of the Commissioner. That the missing pages did not form part of the reasons to invalidate an objection decision under section 51 (10) of the Tax Procedures Act. The Tribunal further stated that the issue of missing pages did not go into the root of the said decision to an extent that it could result in its invalidation.
We now await to see if Weihai will appeal this decision to the High Court.
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