DLA Piper Africa, Kenya (IKM Advocates) recently represented a commercial bank before the Tax Appeals Tribunal (“Tribunal”) in an appeal relating to the refund of withholding tax previously collected by the Kenya Revenue Authority (“KRA”) pursuant to a Court of Appeal judgment that was subsequently overturned by the Supreme Court.

On 6 November 2026, the Tax Appeals Tribunal (“Tribunal”) delivered a judgment directing KRA to refund KES 317 million in withholding tax (“WHT”) collected from the taxpayer whilst the taxes were in dispute.

The decision addresses an important question in tax disputes: where KRA collects taxes pursuant to a court judgment and that judgment is subsequently overturned, is the taxpayer entitled to a refund?

Background to the dispute

The dispute arose from WHT assessments relating to interchange fees and transaction fees paid in connection with international card payment arrangements. The High Court had initially set aside the assessments, but the Court of Appeal reversed that decision. Following the Court of Appeal judgement, the taxpayer was compelled to pay KES 317 million.

The Taxpayer, nonetheless, appealed the Court of Appeal Judgement and where it was successful. The Supreme Court found that the disputed fees were not subject to WHT and overturned the Court of Appeal judgment.

Following this judgement, the taxpayer applied for a refund under Section 47 of the Tax Procedures Act. KRA rejected the refund application, arguing that the Supreme Court judgement applied prospectively, the Supreme Court had not expressly ordered repayment of the amounts collected and in any event the refund claim was time-barred.

The Tribunal's Decision

The Tribunal allowed the taxpayers appeal, and made the following key findings:

i.  Judicial interpretations of tax legislation ordinarily apply to the law as it has always stood.

The Tribunal rejected KRA's argument that the Supreme Court judgment applied prospectively, holding that the Supreme Court had only clarified the proper interpretation of the existing WHT provisions and was not introducing new law. In the absence of an express direction limiting the judgment's temporal effect, KRA could not impose such a limitation.

ii. The date tax is paid is not necessarily the date it becomes overpaid.

The Tribunal considered Section 47(1)(b)(i) of the Tax Procedures Act, which requires refund applications for overpaid income tax to be made within five years from the date the tax was overpaid.

Although the taxpayer paid the disputed tax in December 2020, the Tribunal found that it became overpaid on 5 December 2025, when the Supreme Court overturned the judgment sustaining the tax liability. The refund application made in February 2026 was therefore within the statutory period.

The Tribunal also observed that KRA had relied on an earlier version of Section 47 which referred to the date tax was paid rather than the date it was overpaid.

iii. KRA's entitlement to collect tax is distinct from its entitlement to retain it.

The Tribunal acknowledged that KRA had lawfully collected the tax pursuant to an enforceable Court of Appeal judgment. However, following the reversal of that judgment and the Supreme Court's determination that the disputed transactions were not subject to WHT, KRA could no longer retain the amounts collected.

The Tribunal further recognised the principles of restitution and held that the absence of an express refund order in the Supreme Court judgment did not preclude recovery under Section 47 of the Tax Procedures Act.

Significance of the Decision to Taxpayers

The Tribunal's interpretation of Section 47 provides useful guidance for taxpayers whose disputed liabilities were recovered by KRA before their appeals are finally determined. In particular, the decision recognises that the statutory limitation period for seeking a refund may commence from the time the underlying tax liability is reversed and not necessarily from the original date of payment.

The judgment also reinforces the distinction between KRA's entitlement to collect taxes pursuant to an enforceable judgment and its entitlement to retain those amounts following the reversal of that judgment. This reasoning may be relevant to other disputes involving taxes recovered through enforcement measures or amounts applied against taxpayers' tax credits, where the underlying liabilities are subsequently overturned.

While the decision remains open to appeal and its application will depend on the circumstances of each case, it represents an important development in Kenya's tax refund jurisprudence.

This publication is intended for general information only and does not constitute legal advice.