TAX INVOICES FAIL TO MEET CLAIMS

TAX INVOICES FAIL TO MEET CLAIMS

By Donald Kogai

The Tax Appeals Tribunal ruled that it is not

enough for a taxpayers to provide tax invoice in

order to claim input VAT. Tax invoice is among

documents listed in Section 17 of the VAT Act

2013.

In the ruling that upheld the Kenya Revenue

Authority (KRA’s) position in the case filed by

Osho Drappers Limited, the Tribunal stated that

the documentation must be supported by an

underlying transaction and the taxpayer must

furnish proof that there was an actual purchase

of goods or services.

KRA had in April 2018 issued a tax assessment

notice of Kshs. 1.8 million VAT demand and

Kshs. 3.367 million in Corporation Tax against

Osho Drappers Limited. The company objected

the notice and appealed against at the Tax

Appeals Tribunal.

KRA had disallowed the input VAT claimed by

Osho Drappers Limited. The claim was in

respect to its transactions with four (4)

companies that had been investigated by the

KRA. The companies were found to be involved

in a tax fraud scheme of printing and selling the

invoices without actual supply of goods. KRA in

its decision to disallow the input tax maintained

that Osho Drappers Limited was unable to

prove to the satisfaction of KRA that indeed it

had received the supplies on which the input

tax claims were made.

On its part, Osho Drappers Limited argued that

all it needed to produce was an original tax

invoice and that on production of the

documents, a legitimate expectation was

created that it could claim input VAT as matter

of right as per Section 17 of the VAT Act 2013.

The Tribunal dismissed Osho Drappers

Limited’s case. The Tribunal upheld the tax

assessment and affirmed that once KRA had

raised questions as to the legitimacy and

credibility of documents produced by the

taxpayer, the onus shifted to the taxpayer to

prove that it indeed purchased the supplies

disallowed for input tax claim.

In this case, the Tribunal held that Osho

Drappers Limited did not discharge the onus of

proof and that KRA was right to disallow input

VAT and charge Corporation Tax on the

transaction.