When VAT Evidence Shifts the Burden to KRA: Lessons from the Chairmania Events Case
The Tax Appeals Tribunal has set aside an additional VAT assessment of KSh 15,755,537 imposed on Chairmania Events Limited after finding that the company had provided sufficient documentation to support its input VAT claim.
In Chairmania Events Limited v Commissioner for Investigation and Enforcement, the Tribunal held that once a taxpayer produces competent and relevant evidence supporting an input VAT claim, the evidential burden shifts to the Kenya Revenue Authority to rebut that evidence with precision.
The decision also addresses an important procedural question: when does the statutory 60-day period for issuing an objection decision begin? The Tribunal clarified that the period runs from the date KRA receives a valid objection, not an earlier objection that was declared invalid.
Background of the dispute
Chairmania Events Limited is engaged in event organisation and support services. During 2024, the company hired equipment and outsourced services from Terrex Traders Limited. The outsourced equipment and services included:
- Tents;
- Projectors;
- Sound systems;
- Chairs;
- Dais;
- Video systems; and
- Other equipment used in organising events.
Following investigations into the company’s tax affairs, KRA issued an additional VAT assessment of KSh 15,755,537 on 3 July 2025. Chairmania initially lodged an objection in August 2025. KRA declared the objection invalid and allowed the company to lodge a valid objection. After receiving an extension of time, Chairmania filed its valid objection on 19 August 2025. KRA subsequently issued an objection decision dated 16 October 2025, confirming the assessment. Dissatisfied with the decision, Chairmania appealed to the Tax Appeals Tribunal.
Issues before the Tribunal
The Tribunal identified two principal issues:
- Whether KRA’s objection decision was issued outside the statutory 60-day period.
- Whether KRA erred by rejecting Chairmania’s input VAT claims and raising the additional VAT assessment.
Was KRA’s objection decision issued out of time?
Chairmania argued that KRA had failed to issue its objection decision within the mandatory 60-day period prescribed under Section 51(11) of the Tax Procedures Act. The company calculated the period from its earlier objection and contended that the objection decision was issued four days late. It therefore argued that its objection should be treated as having been allowed by operation of law.
The Tribunal rejected this argument. According to the Tribunal, the earlier objection had been declared invalid because it did not satisfy the statutory requirements for a valid objection. The relevant objection was the valid objection lodged on 19 August 2025. The objection decision issued on 16 October 2025 was delivered on the 44th day after the valid objection. It was therefore issued within the statutory period.
Practical lesson on objection timelines
The 60-day period for an objection decision begins when KRA receives a valid objection. Taxpayers should ensure that an objection:
- Clearly identifies every disputed assessment;
- States the precise grounds of objection;
- Specifies the amendments required;
- Includes all relevant supporting documents;
- Addresses any undisputed tax; and
- Is filed within the prescribed period or accompanied by a proper application for extension of time.
An objection that is filed on time but does not satisfy the statutory validity requirements may not start the 60-day decision period.
Why did KRA disallow the input VAT?
The disputed input VAT arose from supplies allegedly received from Terrex Traders Limited. Chairmania maintained that the purchases were genuine and had been incurred in providing taxable event-management services. It submitted various documents in support of the transactions, including:
- Tax invoices and ETR receipts;
- Bank statements and proof of payment;
- Supplier payment ledgers;
- Payment vouchers; and
- Evidence relating to payments received from customers.
KRA acknowledged that Chairmania had satisfied some of the preliminary requirements for claiming input VAT. However, it questioned the authenticity of the transactions. KRA alleged that:
- Terrex Traders Limited had been identified as a missing trader;
- Some ETR receipts could not be verified on iTax;
- Certain ETR receipts were not accompanied by corresponding tax invoices;
- There was insufficient proof that payments were made to the supplier; and
- Supplier statements and delivery notes had not been adequately provided.
KRA consequently concluded that Chairmania had not proved the existence of the underlying taxable supplies.
The Tribunal’s findings on input VAT
The Tribunal found that Chairmania had produced the documents required to support its input VAT claim under Section 17 of the VAT Act.The Tribunal reiterated that the burden of proof in tax disputes is not stationary. The taxpayer bears the initial responsibility of disproving the Commissioner’s assessment. However, once the taxpayer produces competent and relevant evidence, the evidential burden shifts to KRA.
In this case, Chairmania presented invoices, ETR records, payment documentation, supplier ledgers and vouchers. KRA was therefore required to investigate and rebut that evidence with precision. The Tribunal found that KRA had not adequately discharged this burden. Although KRA questioned the documents, it did not sufficiently investigate and disprove the evidence submitted by Chairmania.
Can a purchaser be held responsible for a supplier’s tax compliance?
One of the most important findings in this case concerns the extent to which a purchaser may be held responsible for the conduct of its supplier. The Tribunal held that Section 17 of the VAT Act does not require a taxpayer to verify whether its suppliers filed their VAT returns or correctly declared the corresponding output VAT. A purchaser ordinarily has no access to a supplier’s tax returns, iTax records or other confidential tax information. It would therefore be unreasonable to require the purchaser to verify information that is outside its visibility and control.
The Tribunal acknowledged that KRA has the right to analyse information obtained from suppliers and other third parties. However, adverse third-party information should be investigated and corroborated before it is used to disallow a taxpayer’s input VAT claim. KRA, as the custodian of taxpayer information and an authority with investigative powers, cannot transfer its responsibility to investigate third-party transactions to a purchaser who has already provided the documents required by law.
Does an invoice alone guarantee an input VAT deduction?
The decision should not be interpreted to mean that presenting an invoice will automatically secure an input VAT deduction. The taxpayer must first demonstrate that a genuine taxable supply occurred. Ideally, the taxpayer should maintain a complete transaction trail connecting:
- The supplier’s quotation or contract;
- The purchase order;
- The tax invoice;
- The eTIMS or ETR record;
- Delivery notes or evidence that services were performed;
- Proof of payment;
- Supplier ledger entries;
- Accounting records; and
- The taxable supplies made using the purchased goods or services.
Where the taxpayer produces competent and consistent evidence, KRA must address that evidence specifically. General allegations concerning a supplier may not be sufficient to defeat a properly supported claim.
The Tribunal’s final decision
The Tribunal found that KRA had erred in disallowing Chairmania’s input VAT claim and raising the additional VAT assessment. It consequently ordered that:
- The appeal be allowed;
- KRA’s objection decision dated 16 October 2025 be set aside; and
- Each party bear its own costs.
Key lessons for Kenyan businesses
1. File a valid objection from the outset
The statutory objection-decision period runs from the date KRA receives a valid objection. Taxpayers should not assume that an incomplete objection will automatically start the 60-day period.
2. Maintain a complete transaction trail
An invoice should be supported by contracts, purchase orders, delivery or service-performance evidence, payment records and accounting entries.
3. Organise evidence at transaction level
Documents should be reconciled invoice by invoice. Sending KRA an unstructured collection of records may make it difficult to demonstrate how each disputed purchase was incurred.
4. The burden of proof can shift to KRA
The taxpayer bears the initial burden of challenging an assessment. Once competent and relevant evidence is submitted, KRA must rebut it through specific evidence and proper investigation.
5. Supplier non-compliance does not automatically defeat the purchaser’s claim
A purchaser should not automatically lose its input VAT because of a supplier’s alleged non-compliance, particularly where the purchaser cannot access or control the supplier’s tax filings.
6. Third-party information should be corroborated
KRA may use third-party and system information during an audit. However, such information should be properly investigated before it is used to impose additional tax on a compliant purchaser.
Conclusion
The Chairmania Events decision demonstrates that successful tax dispute resolution requires both procedural compliance and strong evidence. Although the taxpayer did not succeed on its objection-timeline argument, it ultimately won the appeal because it produced documentation supporting its input VAT claim and KRA did not adequately rebut that evidence. Kenyan businesses should maintain contemporaneous, transaction-level records and ensure that any objection to a KRA assessment is valid, properly structured and supported from the beginning.
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Gichuri & Partners assists businesses with: KRA tax audits and investigations; VAT assessments; Valid tax objections; Independent Review of Objections; Alternative Dispute Resolution; Tax Appeals Tribunal cases; and Tax compliance reviews.
Disclaimer: This article is provided for general information and does not constitute legal or tax advice. Every tax dispute should be considered according to its particular facts, evidence and applicable law.
