A Tax Appeal Tribunal has ruled that the Kenya Revenue Authority (KRA) cannot rely solely on third-party information to deny a taxpayer a legitimate claim for input Value Added Tax (VAT), saying such evidence must be investigated or corroborated.

The tribunal said KRA may analyse third-party information but must corroborate it with other evidence. “A taxpayer should only be taxed based on the textual reading of the applicable statute,” the tribunal said, cautioning against using third-party information “in a carte blanche manner to disenfranchise a taxpayer”.

The decision followed a dispute between events organiser Chairmania Events Limited and KRA over a Sh15.75 million VAT assessment. KRA investigated the company’s affairs for 2024 and issued the assessment on July 3, 2025. After its initial objection was declared invalid, Chairmania filed another on August 19, 2025. KRA confirmed the assessment on October 16, 2025.

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Chairmania challenged the decision, saying KRA had disallowed input VAT despite the company providing tax invoices, Electronic Tax Register (ETR) receipts, proof of payment, supplier ledgers and bank statements. The company said it organises and provides support for events and had hired equipment and services from Terrex Traders Limited, including tents, projectors, sound systems, chairs, dais and video systems.

Chairmania said it paid for the supplies and claimed input VAT on Terrex invoices. It argued its documents met Section 17 of the VAT Act and KRA neither disputed receiving them nor proved they were fraudulent.

Clients seeking services at KRA headquarters, Times Tower, Nairobi.

Photo credit: File | Nation Media Group

KRA said the claims were disallowed after investigations identified Terrex as a “missing trader”. It said the invoices and ETR receipts could not be authenticated and Chairmania had failed to prove the purchases. KRA added that Chairmania’s bank statements showed no payments to Terrex and the company had not provided supplier statements or delivery notes to support the transactions.

The tribunal said the burden of proof in tax disputes is not static but “swings like a pendulum” between taxpayer and taxman.

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It said the initial burden rests on the taxpayer, with the Commissioner’s assessment presumed correct. Once the taxpayer produces evidence supporting its position, the burden shifts to KRA to disprove it. The tribunal said that after Chairmania provided documents required under Section 17, “the burden shifted to the Respondent to dismantle the Appellant’s evidence with precision”, but KRA failed to discharge it.

It added that KRA could have investigated Chairmania’s documents to establish their authenticity but failed to do so.

The tribunal further held that Section 17 does not require a taxpayer to verify whether suppliers filed returns or submitted particular documents to KRA.

It said KRA, as the tax authority with investigative powers and access to taxpayer data, could not require an individual taxpayer to verify transactions beyond submitting documents required by law.

The tribunal found that KRA erred in disallowing Chairmania’s input VAT claim and raising the Sh15.75 million additional assessment.

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