Relief for Nairobi County as Tribunal slashes Ksh.8.3B KRA tax demand

In its ruling, the Tribunal found that a significant portion of KRA’s assessment was not adequately supported and failed to properly consider reconciliations and documentation submitted by the County Government during the audit and objection process.

“The Respondent’s assessment was grossly misstated, without due regard for reconciling items,” the Tribunal stated, while also faulting KRA for disregarding findings from joint reconciliation meetings conducted by both parties.

The dispute stemmed from a compliance review carried out by KRA covering the period between 2019 and 2023, after which the authority issued tax assessments amounting to more than Kshs 8.2 billion over alleged unpaid PAYE, withholding VAT, withholding income tax, VAT on county revenue streams and NITA levies.

Nairobi County challenged the assessment, arguing that the figures included duplicated invoices, voided transactions, exempt supplies, internal transfers and amounts already remitted to KRA.

The Tribunal upheld only the NITA levy component and confirmed a reconciled tax liability of Kshs 130.7 million that had earlier been jointly agreed upon during reconciliation meetings between the two parties.

“The reconciled liability of Kshs 130,689,334.10 was confirmed,” the ruling stated, adding that the remaining contested assessments could not be sustained in their current form.