Kenya: The Torch of Proof in Tax Disputes

30 April 2025
Capital FM (Nairobi)
By CS Paul Muema Mutuku

Taxation is fundamental to government revenue generation, yet disputes over tax assessments frequently arise. In Kenya, tax litigation is primarily handled by the Tax Appeals Tribunal (TAT) at the first instance and thereafter appeals lie with the High Court, and the Court of Appeal. Two legal principles are key to these disputes, these being: the burden of proof and the standard of proof. The burden of proof determines which party--either the taxpayer or the tax agency--must substantiate their claims, while the standard of proof defines the level of certainty required for a claim to be upheld.

In general tax disputes, the standard of proof is on a balance of probabilities, meaning that a taxpayer must demonstrate that it is more likely than not that the tax decision is incorrect. This is consistent with the principle that tax litigation falls under civil law. Although the burden primarily rests on the taxpayer in both tax and customs cases, courts in Kenya have identified scenarios where it can shift to the Kenya Revenue Authority.

Several court decisions in Kenya and other East African Community (EAC) member states have reinforced the principle established in Section 223 of the EACCMA 2004 that once the Commissioner alleges non-compliance with customs laws, the accused must provide sufficient proof to the contrary. In the cases of Kenya Revenue Authority v. Export Traders Limited (2020), the Kenyan High Court ruled that in cases where the KRA alleged mis-declaration of imports, the burden was on the trader to prove the correct classification and origin of the goods. The court emphasized that the law presumes customs authorities' records to be correct unless proven otherwise.

In the Tanzanian Case of Republic v. Hassan Ali (2019), the Tanzanian Court of Appeal upheld the seizure of imported motor vehicles for which proper duty documentation was lacking and duty not paid. The accused person failed to provide evidence of duty payment, and the court ruled that the presumption of illegality stood unchallenged under Section 223 of EACCMA 2004. Further, in the case of Uganda Revenue Authority v. Diamond Trust Bank Uganda Ltd (2021), Uganda's Tax Appeals Tribunal held that once the customs authority asserts that duties were unpaid, the responsibility shifts to the importer to demonstrate full compliance with customs regulations.

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While the burden of proof in tax initially rests on the taxpayer, it is not absolute. Under certain circumstances, the burden may shift to the tax agency resembling the motion of a pendulum, particularly in cases involving fraud or improper tax assessments. This analogy underscores the dynamic nature of the burden of proof in tax disputes, highlighting that it may shift between parties as evidence is presented and contested.

In Commissioner of Domestic Taxes v Metoxide Limited, [2022] KEHC 14613 (KLR) the court ruled that while taxpayers must initially provide documentation supporting their tax positions, if KRA challenges the validity of the documents, the burden shifts back to the taxpayer to provide additional supporting evidence. Although the burden of proof largely lies with the taxpayer, in some instances, courts have ruled that KRA must act transparently and provide clear reasons for its tax assessments. In Equity Group Holdings Limited v Commissioner of Domestic Taxes, 2021] KEHC 25 (KLR) the High Court held that KRA cannot impose tax liabilities arbitrarily and must disclose the rationale behind its decisions.

The burden and standard of proof in Kenyan tax cases are heavily weighted against taxpayers, requiring them to provide substantive and credible evidence to challenge tax decisions. Courts have consistently upheld the presumption of correctness in KRA's assessments, reinforcing the statutory framework under the Tax Procedures Act and the Tax Appeals Tribunal Act.

However, the burden is not absolute--it may shift to KRA in cases where the taxpayer provides credible documentation. Practically, taxpayers can protect themselves by maintaining accurate records; seeking professional tax advice and ensuring transparency in transactions.

While tax administration requires efficient revenue collection, procedural fairness remains essential in ensuring a balanced approach between compliance enforcement and taxpayer rights. Kenyan courts continue to refine these principles, reinforcing a legal framework that supports both government efficiency and fair tax practices.

The Writer is the Commissioner for Legal & Board Services at the Kenya Revenue Authority

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