Judgment summary
Hapag-Lloyd Kenya Limited, a shipping agent for the German shipping line Hapag-Lloyd AG, applied on 21st November 2025 for a refund of VAT input tax credits for January 2025 to October 2025. On 20th January 2026 the Commissioner of Domestic Taxes directed the Appellant to re-apply for the refund, citing a pending legal issue. The Appellant, dissatisfied, appealed to the Tax Appeals Tribunal.
The Tribunal considered whether the refund decision of 20th January 2026 complied with section 47(2) of the Tax Procedures Act, 2015, whether the dispute over the refund of excess input tax had already been determined by the High Court, and whether the Respondent's decision was justified.
The Tribunal found that the refund decision was issued within the statutory 90-day period under section 47(2) of the TPA, but that the substantive issue in dispute, namely the Appellant's entitlement as an agent of a foreign principal but also as a VAT-registered person in Kenya to a refund of input VAT attributable to zero-rated supplies, had already been determined in the Appellant's favour by the High Court in the consolidated Income Tax Appeal E009 of 2025 (with ITA E230 and E231 of 2024) delivered on 26th September 2025.
The Tribunal held that, under Article 163(7) of the Constitution and the doctrine of stare decisis, it was bound by that High Court decision, which had not been stayed, notwithstanding the Respondent's pending appeal to the Court of Appeal. It criticised the Respondent for disregarding a binding court decision on the basis of an unstayed appeal. The appeal was allowed, the refund decision set aside, and the Respondent was directed to process the refund claim within 90 days.
Background
The Appellant is a shipping agent of Hapag-Lloyd AG, a non-resident shipping line registered in Germany, operating under an agency agreement effective 1st March 2021 (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for collection and administration of tax revenue (para 2).
On 21st November 2025 the Appellant applied for a refund of VAT input tax credits for the period January 2025 to October 2025, in the sum of Kshs 3,010,513/- (paras 3, 12). On 20th January 2026 the Respondent wrote directing the Appellant to re-apply for the refund, citing a pending legal issue at the Court of Appeal (paras 4, 41). The Appellant lodged its Notice of Appeal dated 19th January 2026, dissatisfied with the Respondent's response (para 5), and filed its Memorandum of Appeal on 5th May 2026 (para 6).
Core dispute
The dispute concerned whether the Respondent's refusal to process the Appellant's VAT refund application, on the basis that the application should await determination of other pending legal proceedings, contravened section 17 of the VAT Act, 2013, regulation 8 of the VAT Regulations, 2017, and section 47 of the Tax Procedures Act, 2015 (paras 6a, 6c).
The Appellant argued that it was entitled to the refund as a VAT-registered person supplying zero-rated services to its Principal, and that the Respondent had failed to apply the binding decision of the High Court in Income Tax Appeal E009 of 2025 (consolidated with ITA E230 and E231 of 2024), which had determined the same issue between the same parties in the Appellant's favour (paras 15-18).
The Respondent maintained that the Appellant, as an agent, was not entitled to the refund because the economic burden of the input VAT fell on its foreign principal under the agency agreement, and that the refund application should await the Court of Appeal's determination of the Respondent's pending appeal against the High Court decision (paras 41, 43(f), 43(n)).
Court findings
The Tribunal found that the Respondent's refund decision of 20th January 2026 complied with section 47(2) of the TPA in that it was issued within the ninety-day period and clearly communicated a decision declining the refund (para 52).
However, the Tribunal found that the substantive issue in dispute, namely whether the Appellant, as agent of a foreign principal but also a VAT-registered person in Kenya, is entitled to claim a refund of input VAT attributable to its zero-rated supplies, had already been determined by the High Court in the consolidated appeal Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes (Income Tax Appeal E009 of 2025 & E230 & E231 of 2024 (Consolidated) [2025] KEHC 13331 (KLR)) delivered on 26th September 2025, in the Appellant's favour (paras 55-56, 64).
The Tribunal held that the parties and issues in both disputes were the same, and that the interpretation of the agency agreement and the right to a refund under section 17 of the VAT Act had been settled by the High Court (para 57). It held that the Respondent could not disregard a court decision simply because it had appealed to the Court of Appeal without obtaining a stay, describing this justification in strong terms as an unjustifiable disregard of the law by a public entity (para 58).
Invoking Article 163(7) of the Constitution and the doctrine of stare decisis, supported by Asanyo & 3 others v Attorney-General [2020] KESC 62 (KLR) and Jasbir Singh Rai & 3 others v Tarlochan Singh Rai & 4 others [2013] eKLR, the Tribunal held that it was bound to follow the High Court's decision, which remained the law as it had not been overturned (paras 59-62). Consequently, the Tribunal held that the issue could not be re-opened and that the Appellant was entitled to the refund (paras 63-64). The Tribunal found the third issue, whether the Respondent's decision was justified, rendered moot given its findings (para 65).
Outcome
The appeal was allowed. The Respondent's refund decision dated 20th January 2026 was set aside. The Respondent was directed to expeditiously process and issue a decision on the Appellant's refund claim within 90 days from the date of the ruling. Each party was ordered to bear its own costs (para 66).
Major issues / areas of contention
- Whether the Respondent's refund decision dated 20th January 2026 was valid and in conformity with Section 47(2) of the Tax Procedures Act, 2015.
- Whether the issue concerning the Appellant's entitlement to a refund of excess input VAT had already been heard and determined by the High Court.
- Whether the Respondent's decision to defer the refund pending an appeal to the Court of Appeal was justified.
- Whether the Respondent's directive to await determination of other proceedings contravened section 47 of the Tax Procedures Act, 2015, which prescribes a time-bound refund process.
- Whether the Respondent's rejection of the refund application, after purporting to appoint the Appellant as a withholding VAT agent, violated the Appellant's right to fair administrative action.
- Whether the terms of the agency agreement between the Appellant and its foreign principal could override the Appellant's statutory entitlement to input tax deduction and refund under section 17 of the VAT Act, 2013.