Nabo Africa Funds Vs Commissioner of Domestic Taxes Tax Appeal No. E334 of 2024 (2025)

Imagine a Taxpayer that is exempt from the payment of taxes by virtue of being a registered unit trust. However, it mistakenly pays income tax to the Kenya Revenue Authority (KRA) and subsequently requests for the refund of the tax paid error. KRA indeed approves the refund of the claimed amounts but instead of directing that the same be paid in cash, it issues the Taxpayer with a refund adjustment voucher. The Taxpayer however being an entity exempt from payment of tax has no future or current tax liabilities upon which the refund adjustment voucher can be utilized to offset due tax. KRA however insists that as per the provisions of Section 47 of the Tax Procedure Act (TPA), it has discharged its mandate in issuing a Refund Decision within the stipulated timelines and that the law requires that approved claims not paid within six months be utilized against existing debt or future tax liabilities without exception.

The taxpayer insists that since it does not have past or future tax liabilities, because of its tax-exempt status as a registered unit trust, its overpaid tax refund claim ought to be made through a cash refund and not an offset voucher as it cannot utilize the same. These were the fact in the case of Nabo Africa Funds Vs Commissioner of Domestic Taxes Tax Appeal No. E334 of 2024 (2025)

In the referenced case, the Tax Appeals Tribunal (TAT) in its obiter recognized that it was incumbent upon the KRA, having approved Nabo’s claim for taxes paid in error, to employ the most appropriate mode of disbursement of refund within the applicable circumstances of the Nabo, noting that Nabo was tax exempt, thus incapable of accruing any tax liabilities in its current state. Therefore, the KRA’s action of issuing Nabo with a refund offset voucher was an exercise in futility.

In a twist in the case however, the TAT in its final judgment interrogated whether there was an appealable decision, that is, Refund Decision as per the definition under Section 3(1) of the TPA.

As per the TAT, for a refund decision to constitute an appealable decision that could be interrogated by the TAT, the same included the ascertainment, either approval or rejection, and communication of the refund claim decision, within ninety days. That a Refund Decision rested with the Commissioner ascertaining, and either approving or rejecting the refund claim within ninety days as well as communicating the same to the claimant. That the modalities and mechanics of implementing the Refund Decision did not constitute a Refund Decision within the meaning of Section 3(1) of the TAT, and therefore not an appealable decision. Consequently, the Tribunal had no jurisdiction to determine the matter and proceeded to dismiss the same.

In such a circumstance thus, the question then is what remedy does the Taxpayer have where the TAT has determined that it does not have the jurisdiction to determine the matter and yet it has raised a genuine issue? One option would be to appeal the decision to the High Court for further interrogation by the higher court. While at the High Court, the Taxpayer could engage with the Commissioner through ADR noting that in the judgment, the TAT indeed acknowledged that KRA’s action of issuing Nabo with a refund offset voucher was an exercise in futility since it was tax exempt and not likely to incur any future tax liabilities. The other option would be to approach the Judicial Review Court for mandamus orders to make payment in cash. The limitation of this however will be the time limits for judicial review which is a statutory limit of six months.

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