Introduction
In Kenya, tax disputes between taxpayers and the Kenya Revenue Authority (KRA) are often resolved through the Tax Appeals Tribunal (TAT). One critical issue that arises frequently in such disputes is the burden of proof, specifically who bears the responsibility to prove a tax position and to what standard. Understanding this concept is key for both taxpayers and tax practitioners navigating Kenya’s tax system.
What is the Burden of Proof?
The burden of proof refers to the obligation placed on a party to prove or disprove a disputed fact.In tax disputes, the general principle is that the taxpayer bears the burden to disprove assessments made by the KRA unless otherwise provided by law.
This principle is grounded in Section 56(1) of the Tax Procedures Act, which states:
“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”
Key Case Decisions from the Tax Appeals Tribunal
- Income Tax Appeal No. 38 of 2020 – [Viva Afya Limited v. Commissioner of Domestic Taxes]
The Tribunal held that while the KRA had the mandate to raise assessments, once raised, the burden shifted to the taxpayer to provide documentation or evidence to show that the assessments were excessive or incorrect. The appellant’s failure to produce sufficient invoices and bank reconciliations weakened its case, and the Tribunal upheld the KRA’s decision.
- TAT No. 132 of 2022 – [ABC Ltd v. KRA]
In this case, the taxpayer attempted to challenge VAT assessments, claiming double taxation. However, the Tribunal ruled that the taxpayer had not discharged the burden of proof since it failed to provide proper sales ledgers, ETR receipts, or audit reports to substantiate its claims.
- TAT No. 138 of 2021 – [XYZ Company v. Commissioner of Investigations]
Here, the KRA relied heavily on third-party data to raise an assessment. The Tribunal emphasized that while KRA can rely on intelligence data, once challenged, it must also furnish some form of reasonable evidence. Thus, a shared burden can arise when the taxpayer provides credible counterevidence.
Lessons for Taxpayers
- Maintain accurate and accessible records (invoices, payment slips, contracts, audit trails).
- Respond to KRA queries with well-documented responses.
- Engage tax professionals early during audits and objections.
- Use case precedents from TAT to argue similar factual patterns.
Conclusion
In the Kenyan tax landscape, the burden of proof rests primarily with the taxpayer. However, as seen in recent TAT decisions, KRA’s assessments are not immune to challenge, especially when the taxpayer provides credible, consistent evidence. Businesses and individuals should therefore treat tax documentation and compliance as a year-round discipline, not just an annual obligation.
