Setback for KRA as Airtel Prevails in Sh791 Million Tax Battle

Airtel Networks Kenya Limited has emerged victorious in a legal dispute against the Kenya Revenue Authority (KRA), resulting in a loss of Sh791 million for the tax agency.

Judge Alfred Mabeya of the Commercial Court has determined that the Kenya Revenue Authority’s (KRA) request for transaction records exceeding five years is unjust and unlawful. This ruling supports the Tax Appeal Tribunal’s (TAT) conclusion that KRA lacks legal grounds to demand the Sh791 million. Additionally, Justice Mabeya has rejected KRA’s assertion that Airtel bears a responsibility towards them, noting that this argument was not raised before the tribunal.

In October 2018, KRA requested Airtel to undergo an audit of their accounts from 2013 to 2017, with a specific focus on pay-as-you-earn and withholding tax records. The Kenya Revenue Authority (KRA) then conducted another audit and in 2019 imposed a tax demand of Sh 791 million on Airtel, which was a year after their previous audit. Airtel disagreed with the demand and decided to challenge it by going to the Tax Appeals Tribunal (TAT), stating that the taxman did not provide a valid explanation for conducting the audit after a five-year delay.

Airtel emerged victorious in the tribunal’s decision, prompting KRA to voice its discontent and escalate the issue to the Commercial Court. KRA contended that TAT had made a mistake by failing to acknowledge that the requested documents had indeed been requested within the allotted timeframe, thus placing the blame for any audit delays on Airtel. KRA asserted that it was Airtel’s responsibility to ensure the timely submission of the required documents to expedite the proceedings.

In its response, Airtel requested the court to reject the appeal, emphasizing the importance of KRA following the Tax Procedures Act. Airtel pointed out that KRA was well aware of the legal time constraints for pursuing tax obligations after a span of five years, therefore absolving taxpayers from any responsibility for the agency’s failures. Additionally, the financial burden of the lawsuit fell upon KRA.