Nairobi — The Tax Appeals Tribunal has ruled in favor of the Law Society of Kenya (LSK) regarding whether VAT is applicable on annual practicing certificate fees and other fees charged on the society members.
The ruling came after the Kenya Revenue Authority claimed that the society should be charged, for the years 2021 and 2022, a VAT on practicing certificate fees, membership fees, CPD trainings, annual conference costs, and other similar fees charged to members over the past years.
KRA claimed that the society should be charged a VAT amounting to a principal amount of Kshs 80,048,142, with penalties of Sh4 million and interest of Sh17.4 million (total amount demanded being Sh101.45 million).
However, after the society brought the matter to court after objecting to it, the tribunal stated that the membership and practicing certificate fees are not rendered "by way of business" and are statutorily applied toward the society's lawful objectives, thus exempting it from tax.
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"The implications of KRA's VAT decision, had it not been challenged, would have been that going forward, all fees charged by LSK to members, including fees for annual practising certificates, attendance at CPD trainings, fees for annual conference attendance, and other fees, would all have been subject to VAT at the standard rate of 16% going forward," LSK stated.
Additionally, the tribunal and the vocational training conducted by the LSK were not business consultancy; they were not subject to any VAT since they were part of the society's mandate to promote
The tribunals further ruled that the project funds by LSK, which was funded by doors, are also not supposed to be taxed since it was determined to be legal aid and an education initiative.
According to the tribunal, other income, such as library funds, LSK journal levies, ID cards, and CSR contributions, was also exempt from VAT since it was determined to be ancillary to the society's primary objective.
The tribunal further noted that the Justice Cup Fees and Sponsorships, which they said promote legal advocacy, inclusion, and public participation, incurred more expenditure than income, thus exempting it from tax.
Lastly, the tribunal determined that the building levy, which supports infrastructural development critical to LSK members, is treated as part of membership-related contributions and thus is also exempt from tax.
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