Before you decide to appeal a tax dispute to the Tax Appeals Tribunal, you need to think it through. Is it worth it, or are you better off negotiating with KRA to reach a mutual settlement? A KRA tax appeal is a financial and strategic decision as much as it is a legal decision. Therefore, difficult considerations must be made. You must ask two critical questions: How long will the appeal take, and how much will it cost?
This process is governed by the Tax Procedures Act and the Tax Appeals Tribunal Act, which provide strict statutory timelines, practical durations, and financial requirements. For instance, filing the appeal requires a mandatory fee of KSH 20,000. This is just the filing fee, and you must consider other costs such as professional and opportunity fees. The timelines and costs also vary depending on the complexity of the tax dispute. We prepared this article to explain the timeline and costs of KRA tax appeals in Kenya.
Recap of the KRA Tax Appeals Process in Kenya
If you need a deeper understanding of the KRA tax appeals process in Kenya, check out our step-by-step guide. In a nutshell, the process entails three primary stages. These are:
- Objection: Filing an objection to the Commissioner following an unsatisfactory tax decision by the KRA. KRA then delivers an objection decision after an internal review.
- Appeal to the Tax Appeals Tribunal (TAT)
- Appeal to the High Court.
Each of the stages has statutory timelines that you must understand before proceeding. Let’s dive deeper into these timelines below.
Timeline of the KRA TaxAppeal in Kenya
We are going to break down the KRA tax appeal process into stages for a practical representation of the statutory timelines.
Stage #1: Objection Stage
The Tax Procedures Act states that the taxpayer must file a Notice of Objection within 30 days of receiving a tax decision from KRA. On the other hand, the KRA Commissioner has up to 60 days to issue an objection decision. Strict compliance is mandatory. A late or invalid objection may prevent further appeal.
Practical Timeline
The above statutory timelines are on paper, but several aspects might cause unavoidable delays. For example, KRA might request further information following an objection, which delays the objection decision. Here are practical timelines for the objection stage:
- 1-3 months for straightforward objection cases.
- 2-4 months, where additional documentation is requested.
Stage #2: Appeals to the TAT
Note: Before proceeding to appeal the objection decision to the TAT, you might want to pursue the Alternative Dispute Resolution (ADR) option. However, not all tax disputes can move to ADR. When unsure, consult a tax agent for guidance. The next step after an unsatisfactory objection decision is appealing the decision to the TAT. Here are the statutory timelines of the appeal stage:
- File an appeal within 30 days after receiving the objection decision.
- Submit the following documents within 14 days of filing an appeal:
- Memorandum of appeal
- Statement of facts
- Copy of the objection decision
- Other supporting documents
- The Tax Appeals Tribunal should hear and determine the appeal within 90 days. This period can be extended by 30 days (to make it 120 days) in certain circumstances.
Practical Timelines
Despite the provisions of law, appeal cases may take longer. Case backlog, adjournments, documentation volume, and the pursuit of ADR between proceedings may cause delays. Here are the realistic timelines of the appeal stage.
- 3-6 months for simple tax disputes.
- 6-12 months for moderately complex cases.
- 12 months and above for high-value or technical disputes.
Stage #3: Appeal to the High Court
If a taxpayer is not satisfied with the TAT’s decision, the next step is to appeal to the High Court of Kenya. The statutory timeline is to file the appeal within 30 days after TAT’s decision. Once the case has landed in the High Court, it may take between 12 and 36 months, depending on the complexity.
Total Estimated Timeline of a KRA Tax Appeal in Kenya
If you’re looking for a quick estimate of how long a KRA tax appeal will take, here’s the timeline from objection to High Court:
- 6-12 months if the appeal is resolved in the TAT.
- 1-3 years if the tax dispute escalates to the High Court.
- 3-5 plus years if the case escalates beyond the High Court.
Costs of KRA Tax Appeals in Kenya
When most taxpayers think about the cost of a tax appeal in Kenya, they think about the filing fees. This is just one of the costs. Other charges include professional representation fees, statutory charges, and indirect financial exposure (opportunity costs).
Statutory and Filing Fees
To file an appeal in the quasi-judicial tribunals and courts, a taxpayer must pay a non-refundable filing fee. Here are the various statutory charges to expect during the KRA tax appeals process:
- TAT filing fee: KSH 20,000.
- High court filing fee: Varies from case to case, depending on the disputed amount and applicable court fee schedules.
Professional Representation Fees
Professional fees vary from case to case. They include:
- Tax consultant fees.
- Tax advisory firm fees.
- Advocate fees for representation at the TAT or High Court.
- Accountant costs.
- Expert witness fees.
Undisputed Tax Payments
The Tax Procedures Act clearly states that before proceeding to the Tax Appeals Tribunal, the taxpayer must pay the undisputed tax or have a payment arrangement approved by the KRA Commissioner. This payment might affect your cash flow, hence the need to include it among the costs of the tax appeal process.
Indirect and Opportunity Costs
Away from the direct costs, a taxpayer should consider the following opportunity costs:
- Management time spent compiling legal documents.
- Disruption of normal business operations.
- Impact on credit facilities or investor confidence.
- Administrative burdens due to prolonged dispute.
Accumulated Penalties and Interest
Unbeknown to many, the penalties and interests applicable to the principal disputed tax continue to accrue until the liability is settled. It doesn’t matter if the outcome favors the taxpayer or KRA; at the end of the case, all accrued penalties and interest must be paid.
When a KRA Tax Appeal in Kenya Makes Financial Sense
All said and done, your choice for resolving a tax dispute must make financial sense. That’s why ADR and out-of-court settlements exist. However, when done well, a tax appeal can be the best bet for a taxpayer, especially with solid proof that KRA is at fault. Here are the factors to consider before filing a KRA tax appeal:
- The strength of legal and factual grounds.
- The disputed amount vs. the projected overall cost of the appeal.
- Potential interest accumulation.
- The likelihood of settlement through ADR.
- Your reputation and relationship with KRA and the need to protect it.
In some instances, pursuing ADR reduces both the timeline and costs of KRA appeals in Kenya. When unsure, consult an experienced tax agent for professional advice.
Final Words
While the timeline and costs of KRA tax appeals in Kenya are governed by the Tax Procedures and Tax Appeals Tribunal Acts, the practical timelines and costs depend on various factors. These include the complexity of the tax dispute and the escalation level of the dispute.
Generally, the structure timelines are 30 days to object, 60 days for objection decision, and 30 days to appeal. Once the case escalates to the High Court, the duration can extend to years. A tax advisor can help you figure out the estimated timelines and costs of your particular tax appeal, depending on the complexity.
