Blow to KRA as court rules businesses have right to be heard in tax disputes

The Court of Appeal has ordered a fresh hearing of a tax dispute involving an insurance broker and the Kenya Revenue Authority (KRA), after finding that the company was not given an opportunity to be heard on the substantive issues before the Tax Appeals Tribunal.

A three-judge bench comprising set aside the judgment of the High Court and remitted the matter to the Tax Appeals Tribunal for hearing and determination of the substantive issues.

The decision, delivered in Nairobi on July 31, 2026, arose from a dispute over an excise duty assessment of Ksh37,788,533 issued to BTB Insurance Brokers for the period between July 2013 and September 2014.

The dispute dates back to an audit by KRA, which determined that BTB had earned commission income of Ksh293.7 million during the period but had not subjected the income to excise duty.

KRA subsequently issued an assessment for the unpaid excise duty with BTB challenging it before the Tax Appeals Tribunal, which dismissed its appeal in November 2016.

The company then appealed to the High Court, which upheld the Tribunal's decision in April 2020. The matter eventually reached the Court of Appeal.

The central issue before the appellate court was not whether BTB ultimately owed the disputed excise duty, but whether the company had been given a proper opportunity to argue its substantive appeal before the Tribunal.

The Court of Appeal noted that during proceedings before the Tribunal, KRA had raised a preliminary objection arguing that BTB's case was res judicata, meaning that the issues had already been determined in an earlier case.

The Tribunal asked the parties to make written submissions on the preliminary objection.

According to the Court of Appeal's judgment, the Tribunal subsequently considered the preliminary objection and proceeded to determine the substantive appeal.

The appellate court found that the parties had not been given an opportunity to make submissions on the substantive appeal before that determination was made.

The court held that the failure to allow BTB to submit on the substantive appeal violated both Section 26 of the Tax Appeals Tribunal Act and the constitutional right to a fair hearing under Article 50(1).

“Failure to give the appellant an opportunity to submit and be heard on the substantive appeal not only contravened the express provisions of section 26 of the Tax Appeals Tribunal Act but also the constitutional right to a fair hearing as guaranteed under Article 50(1) of the Constitution,” the judgment states.

The court therefore said it did not need to determine the merits of the other grounds raised in the appeal at that stage.

“The only recourse at this point in time is to return the matter to the Tribunal for hearing and determination of the substantive issues on merit.”

For businesses challenging tax assessments, the decision deals with the process through which a dispute is heard rather than declaring that a particular tax assessment is automatically invalid.

In BTB's case, the Court of Appeal did not determine that the Ksh37.7 million assessment was not payable.

Instead, it set aside the High Court judgment and directed the Tax Appeals Tribunal to hear and determine the substantive issues.

The court's orders were that the High Court judgment in the matter be set aside, the dispute be remitted to the Tribunal for hearing and determination on the substantive issues, and KRA bear BTB's costs in the Court of Appeal and High Court.

The fresh proceedings will therefore give the parties an opportunity to address the substantive tax dispute before the Tribunal.

The original disagreement concerned whether BTB, as an insurance broker, was liable to charge and remit excise duty on commissions earned.

In the 2020 High Court judgment, Justice Mary Kasango upheld the Tribunal's finding that the Finance Act 2013 brought persons licensed under the Insurance Act within the definition of a financial institution for purposes of the relevant excise duty provisions.

The High Court had consequently found that BTB's commission income was subject to the excise duty and dismissed its appeal.

However, the appellate court found that “given that the action of the Tribunal violated the sacrosanct right to a fair hearing, we see no need to delve into the merits of the other grounds of the appeal.”

That finding is now part of a dispute that will return to the Tribunal following the Court of Appeal's decision on the fair-hearing issue.