Judgment summary
The Appellant/Applicant, Equator Bottlers Limited, filed a Notice of Motion dated 23rd March 2026 and filed on 24th March 2026 seeking a stay of proceedings in Tax Appeal No. E624 of 2025 pending completion of the Mutual Agreement Procedure (MAP) under Article 25 of the Kenya-South Africa Double Tax Agreement, with costs of the application in the appeal [1].
The Tribunal identified two issues for determination: first, whether the Tribunal had jurisdiction to grant the orders sought; and second, whether the application was merited [38].
The Tribunal held that it had procedural power to regulate the timing of its own judgment and that the authorities relied on by the Respondent did not bar the application, as those cases concerned stays sought on account of parallel litigation before a Superior Court rather than a defined deferment for a treaty mechanism [42, 43, 45, 46].
The Tribunal found the application merited and allowed it to the extent that the judgment delivery date was adjourned, granting the parties leave to settle the dispute out of the Tribunal by pursuing MAP within 120 days [59, 60].
Background
The dispute originated from the Respondent's compliance check for the period January 2019 to December 2022, during which the Respondent faulted the Appellant/Applicant for failing to withhold tax on technical fees and computer charges paid to Coca-Cola Sabco (Pty) Ltd, a resident of South Africa [5].
The Respondent stated it issued assessments dated 31st December 2024 in respect of additional withholding income tax on technical fees and computer-related charges paid to Coca-Cola Sabco (Pty) South Africa; the Appellant/Applicant objected on 10th February 2025; the Respondent confirmed the assessments on 9th April 2025; and following an Alternative Dispute Resolution process that partially settled the matter, the sole surviving issue concerned the additional withholding income tax [26].
The appeal was filed on 13th June 2025 [31]. The hearing of the appeal was held on 3rd March 2026, where the Appellant/Applicant's witness statement of Archi Ramana dated 23rd February 2026 was adopted as evidence in chief and presented for cross-examination and re-examination. The parties were directed to file written submissions on or before 24th March 2026, and a judgment date of 26th May 2026 was given [36].
The application was supported by an affidavit sworn by Joe Mutisya, the Appellant/Applicant's Finance Director, dated 23rd March 2026 and filed on 24th March 2026 [2]. The Respondent opposed the application through Grounds of Opposition dated and filed on 1st April 2026 [23].
Core dispute
The Appellant/Applicant sought a stay of the proceedings in Tax Appeal No. E624 of 2025 pending completion of the Mutual Agreement Procedure under Article 25 of the Kenya-South Africa Double Tax Agreement [35].
The Appellant/Applicant contended that the technical fees and computer charges paid to Coca-Cola Sabco (Pty) Limited had been taxed in South Africa, and that the Respondent's attempt to tax those charges in Kenya amounted to double taxation contrary to the DTA [2a, 5]. It argued that it had invoked MAP, that the South African Competent Authority had accepted the case and engaged the Kenyan Competent Authority, and that MAP was capable of resolving the dispute [6, 18].
The Respondent's principal contention was that the Tribunal lacked jurisdiction to stay its own proceedings, more so for an indeterminate period, on the basis of a process over which neither party had control [28]. It argued the only stay open to the Tribunal was under Section 18 of the Tax Appeals Tribunal Act and that reliance on Rule 27 of the Tax Appeals Tribunal (Procedure) Rules, 2015 was misconceived [28, 29]. The Respondent also contended that no evidence of a formal request to the Competent Authority had been placed before the Tribunal, that the Appellant/Applicant as a Kenyan resident ought to have presented its case through the Kenyan Competent Authority under Article 25(1), and that the timing of the application disclosed forum-shopping [31, 32, 33].
Court findings
On the first issue of jurisdiction, the Tribunal accepted as settled law that it is a creature of statute exercising only the jurisdiction conferred upon it [40]. It noted that in Commissioner of Domestic Taxes v Sony Holdings Limited [2021] KEHC 7496 (KLR), following Commissioner of Investigations and Enforcement v Estama Investments Limited, the High Court held the Tribunal is a creation of statute with limited jurisdiction and there is no provision empowering it to stay its own proceedings on account of other proceedings pending before a Superior Court [40].
The Tribunal found that the Sony Holdings case did not block the present application, because the reasoning in that case and in Estama was directed at a stay sought on account of parallel litigation before a Superior Court, whereas the present application was of a different character, asking the Tribunal to allow the parties a defined period to pursue MAP before delivering judgment [42, 43].
The Tribunal noted that Section 18 of the Tax Appeals Tribunal Act concerns orders staying or affecting the implementation of the decision under review and is not the source of the Tribunal's authority to regulate the timing of its own judgment [44]. It found its power to manage its process derived from its position as an adjudicative body, reinforced by Rule 27 and Rule 21(4) of the Tax Appeals Tribunal (Procedure) Rules, 2015, and that using these provisions did not create jurisdiction where none existed [45, 46].
On the second issue, the Tribunal noted that Article 2(5) and 2(6) of the Constitution make treaties ratified by Kenya part of Kenyan law, and that Article 25 of the DTA establishes MAP, recognised by the OECD and UN Commentaries and BEPS Action 14 as a taxpayer-driven mechanism [47, 48].
The Tribunal was aware of De La Rue Currency and Security Print Limited v Commissioner of Domestic Taxes (Income Tax Appeal No. E106 of 2021), in which the High Court held the OECD and UN Commentaries do not require MAP to take precedence over local proceedings and that the Tribunal retains jurisdiction notwithstanding a MAP [49]. The Tribunal accepted that MAP does not take away its jurisdiction, but distinguished De La Rue on the basis that there the taxpayer sought to defeat the Tribunal's jurisdiction, whereas here the Appellant/Applicant merely sought a finite deferment of judgment [50, 51].
Exercising its discretion, the Tribunal found a finite deferment warranted, noting the subject matter was the kind of juridical double taxation dispute MAP is designed to resolve, that the South African Competent Authority had accepted the case and engaged its Kenyan counterpart, and that comparative jurisprudence in Glencore Energy UK Ltd v Revenue & Customs and Oracle Corporation Australia Pty Ltd v Commissioner of Taxation supported allowing the treaty mechanism a defined opportunity to operate [53, 54]. It confined the deferment to a fixed period to meet the concern against open-ended suspension [55].
The Tribunal found the supporting affidavit and the unchallenged position that the South African Competent Authority had engaged the Kenyan Competent Authority sufficient, for the limited purpose of the application, to establish a bilateral process was genuinely underway, and that the Respondent's residence objection related to the eventual merits and was best resolved at the hearing [57, 58]. It affirmed that granting additional time was not a stay of its proceedings but an adjournment of the judgment date [59].
Outcome
The Tribunal found the application merited and issued the following orders: the Notice of Motion application dated 23rd March 2026 and filed on 24th March 2026 was allowed to the extent that the judgment delivery date was adjourned; the parties were granted leave to settle the dispute out of the Tribunal by pursuing Mutual Agreement Procedure (MAP) within 120 days from the date of delivery of the Ruling; upon the lapse of 120 days, where the parties failed to settle within that period, the dispute would be referred back to the Tribunal for determination and issuance of a judgment; and no orders as to costs [60].
Major issues / areas of contention
- Whether the Tribunal had jurisdiction to grant the orders sought, including a stay or adjournment of its own proceedings [38].
- Whether the application for a deferment of judgment pending completion of the Mutual Agreement Procedure was merited [38].
- Whether Section 18 of the Tax Appeals Tribunal Act was the source of any power to stay proceedings, and whether Rule 27 and Rule 21(4) of the Tax Appeals Tribunal (Procedure) Rules, 2015 permitted the Tribunal to regulate the timing of its judgment [44, 45].
- Whether the Mutual Agreement Procedure under Article 25 of the Kenya-South Africa Double Tax Agreement warranted a finite deferment of the Tribunal's judgment [53].
- Whether the Appellant/Applicant, as a Kenyan resident, ought to have presented its case through the Kenyan Competent Authority under Article 25(1) of the DTA [32, 56, 58].
- Whether the timing of the application amounted to forum-shopping or an abuse of the Tribunal process [33, 56].