Tax Disputes

Tax compliance advisory is the practice of helping businesses and individuals meet their tax obligations under Kenyan law — ensuring that returns are filed, taxes are paid, and records are maintained in accordance with the requirements of the Kenya Revenue Authority (KRA) and the various tax statutes. In Kenya, tax compliance is governed by the Income Tax Act (Cap 470), the Value Added Tax Act, 2013, the Excise Duty Act, 2015, the Tax Procedures Act, 2015, and the East African Community Customs Management Act — with the KRA as the principal administrative body and the Tax Tribunal and the High Court as the dispute resolution forums.

This area covers the full range of tax obligations. Advocates assist clients with the registration for the various tax obligations — the Personal Identification Number (PIN), which is required for almost every transaction in Kenya; Value Added Tax (VAT) registration, which is mandatory for businesses with an annual turnover above KES 5,000,000; Pay As You Earn (PAYE) registration for employers; and the registration for other statutory deductions including the National Social Security Fund (NSSF), the National Hospital Insurance Fund (NHIF), and the Affordable Housing Levy.

Advocates advise on the filing of tax returns — including monthly VAT returns, monthly PAYE returns, quarterly instalment tax returns, and annual income tax returns. Advocates ensure that returns are filed on time to avoid the penalties and interest that accrue on late filings, and they ensure that the returns are accurate to avoid the additional assessments and penalties that can arise from under-declaration. Advocates also advise on the withholding of tax on payments to residents and non-residents — including withholding tax on professional fees, management fees, royalties, interest, and dividends — and on the application of double taxation agreements where the payee is a resident of a treaty country.

Advocates assist clients with KRA audits and investigations. Advocates advise on the scope of the audit, the documents that the KRA is entitled to request, the rights of the taxpayer during the audit, and the management of the relationship with the KRA officers. Advocates review the audit findings, prepare responses to the KRA's queries, and negotiate the resolution of disputed items. Where the KRA issues additional assessments, they advise on the merits of objecting, and they prepare and file the objection under section 51 of the Tax Procedures Act.

Advocates provide ongoing tax advisory services — keeping clients informed of changes in the tax law (including the annual Finance Act changes), advising on the tax implications of business decisions, and recommending tax-efficient structures and transactions. Advocates work alongside accountants and auditors to ensure that the tax advice is integrated with the client's financial reporting and accounting systems.

For businesses with international operations, they advise on transfer pricing compliance — including the preparation of transfer pricing documentation, the conduct of functional analysis, and the management of transfer pricing audits. Advocates also advise on the application of the various tax incentives available under Kenyan law — including the capital allowances under the Income Tax Act, the tax benefits available in economic zones and special economic zones, and the investment deductions for capital expenditure.

Advocates also handle the resolution of tax disputes — filing objections, appealing to the Tax Tribunal, and further appealing to the High Court and the Court of Appeal. The work also covers the procedural rules that govern tax disputes, including the requirement to pay the tax in dispute (or 50% in some cases) before filing an appeal.