How KRA Agency Notices Work in Kenya: Can the Taxman Recover Money Through Your Bank?

An agency notice is a written direction issued by the Kenya Revenue Authority under Section 42 of the Tax Procedures Act, 2015.

It appoints a third party as an agent for the purpose of collecting tax from money that belongs to, is held for, or is payable to a taxpayer.

The agent may be a bank holding funds in an account, a business that owes money to the taxpayer or another person authorised to make payments to them.

The notice identifies the amount the agent is required to remit.

Under the law, it cannot exceed the unpaid tax or the amount KRA reasonably believes will not be paid by the due date.

For example, if KRA says a person owes Sh10 million and a bank holds Sh3 million for that person, the notice can direct the bank to remit the funds available within the statutory framework.

It does not turn the remaining Sh7 million into money the bank automatically owes from its own resources.

When can KRA issue one?

Section 42 provides for agency notices where tax is unpaid or KRA has reasonable grounds to believe that a taxpayer will not pay by the due date.

The law also sets specific conditions governing when the notice may be issued.

These include situations where a taxpayer has defaulted on an instalment, failed to object to an assessment within the prescribed period, failed to appeal an objection decision in time, submitted a self-assessment but not paid the tax, or failed to appeal an assessment specified in a decision of the Tax Appeals Tribunal or a court.

Those provisions are important because an agency notice is a tax-recovery tool, not an unrestricted power to collect any amount KRA wishes.

The authority must act within the legislation and the status of the tax liability.

What happens after the bank receives it?

The bank must establish whether it holds money for the taxpayer or owes money that is due to them.

If the funds are available and the notice is valid, it must remit the specified amount within the applicable time.

KRA is required to serve the taxpayer with a copy of the notice when it serves the agent.

The law also provides for what happens where the agent cannot comply because it does not hold enough money.

The agent must notify KRA in writing within 14 days and explain its inability to pay.

KRA must then respond in writing within 30 days, accepting the explanation and cancelling or amending the notice, or rejecting it.

An agent that fails to comply without reasonable cause can become personally liable for the amount specified.

That is why banks cannot simply ignore a properly issued notice.

Does an agency notice mean the whole account is seized?

Not automatically.

The notice directs payment of funds covered by the statutory process, up to the amount specified.

The actual amount recoverable through that bank depends on money held or due to the taxpayer and the terms of the notice.

The Tax Procedures Act has separate provisions for preserving funds where KRA believes a taxpayer may frustrate recovery.

Under Section 43, the authority can seek a preservation order through the High Court.

That process is legally distinct from the Section 42 agency notice.

The wording of the document therefore matters.

A notice requiring a bank to remit funds should not be described as a final confiscation of every asset belonging to the taxpayer.

Can a taxpayer challenge the tax demand?

Taxpayers have statutory routes for challenging assessments.

Generally, a taxpayer may lodge an objection with KRA within the prescribed period, provide supporting records and, if dissatisfied with the objection decision, appeal to the Tax Appeals Tribunal.

Further appeals may be made through the courts under the applicable law.

An agency notice is a recovery step, so anyone served with one should establish the basis of the underlying assessment, the amount outstanding, whether relevant objections or appeals have been determined, and whether the notice complies with the Act.

The available remedies depend on the circumstances and the stage the case has reached.

A person who disputes the liability should obtain the assessment, objection decision and recovery notice and seek qualified tax advice promptly rather than assume that a challenge automatically stops collection.

What happens if the bank has no money?

If the agent does not hold enough funds, it must follow the statutory notification process and explain why it cannot comply.

The amount recoverable through that agent will be affected by the funds available, while KRA may pursue other recovery methods permitted by law.

The bank is not supposed to pay money it does not owe or hold merely because the tax demand is large.

But it must respond correctly and within the law.

The significance of the agency notices

Agency notices allow KRA to collect tax through third parties where the law permits, rather than relying solely on the taxpayer to make payment voluntarily.

They also place responsibilities on those third parties, especially banks and businesses that hold or owe money to taxpayers.

For individuals and companies, the practical lesson is to keep tax returns, payment records and financial documents in order, respond promptly to assessments and observe objection and appeal deadlines.

Leaving a tax assessment unattended can narrow the available avenues for challenging it and expose funds held elsewhere to recovery action.