Judgment summary
The Appellant, Pollen Limited, produces vegetable seeds for export and provides research and development services to non-resident companies in the Syngenta group. It lodged VAT refund claims of Kshs. 41,741,294.00 for tax periods between July 2024 and June 2025, which the Respondent rejected [4], [5], [72].
The Respondent rejected the claims on the basis that the Appellant acted as an agent of Syngenta Seeds B.V., that the input VAT was a cost to Syngenta and not to the Appellant, and in reliance on the Tribunal's earlier decision in TAT E1064 of 2024 [5], [17], [73].
The Tribunal framed three issues: whether the Respondent discharged its statutory mandate under Section 47 of the Tax Procedures Act; whether the Appellant is an agent of Syngenta Seeds B.V. and Syngenta Crop Protection AG and whether TAT E1064 of 2024 governs the appeal; and whether the Appellant is entitled to the refunds [99].
The Tribunal found that the Respondent failed to discharge its mandate under Section 47 of the TPA, found that the Appellant was not an agent of the Syngenta entities, distinguished the decision in TAT E1064 of 2024, and held that the Appellant was entitled to the refunds [111], [140], [144], [157].
The Tribunal allowed the appeal, set aside the Rejection Orders, and directed the Respondent to process the refunds within sixty days, with each party to bear its own costs [158].
Background
The Appellant is a private limited liability company incorporated in Kenya whose principal business activity is the production of vegetable seeds for export [1]. The Respondent is the Commissioner of Domestic Taxes [2].
The Appellant lodged VAT refund claims amounting to Kshs. 41,741,294.00 for the tax periods of July 2024, August 2024, September 2024, October 2024, November 2024, January 2025, March 2025, April 2025 and June 2025 on 24 July 2025 [4].
The Respondent rejected the refund claims by VAT Claim Rejection Orders dated 28 July 2025 and 7 August 2025 [5]. The Appellant filed its Notice of Appeal dated 27 August 2025 and its Memorandum of Appeal dated 10 September 2025 [6], [7].
The Appellant stated that it is a producer appointed by Syngenta Seeds B.V., a non-resident company incorporated in the Netherlands, as a non-exclusive producer of vegetable seeds, and that it also provides research and development services to Syngenta Crop Protection AG, a non-resident company based in Switzerland [9]. The Appellant stated that it exited the flower cuttings business in 2023 and is now solely focused on the production of vegetable seeds, specifically tomato seeds, and the provision of R&D services [13]. The Appellant is remunerated on a cost-plus basis [14].
Core dispute
The central dispute was whether the Appellant acted as an agent of Syngenta Seeds B.V. and Syngenta Crop Protection AG such that the input VAT it incurred was a cost to those entities and not to the Appellant, and whether the Appellant was therefore entitled to the VAT refund claims of Kshs. 41,741,294.00 [15], [78], [115].
The Appellant contended that it is not an agent, that it is an independent contractor which procures inputs in its own name and bears its own commercial risk, that its supplies are zero-rated, and that the Respondent failed to ascertain the validity of the claims under Section 47 of the TPA and improperly relied on the decision in TAT E1064 of 2024 [7], [17], [35], [41], [69].
The Respondent contended that a principal-agent relationship existed notwithstanding the contractual disclaimers, that Syngenta exercised control over the Appellant, that the input VAT was a cost to Syngenta, and that the earlier decisions in Appeal No. 311 of 2022 and TAT E1064 of 2024 had already set precedent on the issues [73], [76], [86], [96].
Court findings
On the first issue, the Tribunal found that Section 47 of the TPA imposes an obligation to ascertain the validity of a refund application and to determine and communicate a decision within one hundred and twenty days, and that ascertainment entails an inquiry directed at the specific claim [102], [103]. The Tribunal found that none of the Rejection Orders disclosed any examination of the VAT returns, purchase invoices or export documentation for the periods in dispute, any audit findings, or any independent evidential basis, and that the Appellant's averment that no audit was conducted was not controverted [106]. The Rejection Order dated 7 August 2025 was premised on a business line the Appellant had exited in 2023 [107]. The Tribunal found the Respondent failed to discharge its statutory mandate under Section 47 of the TPA [111]. The Tribunal noted that this procedural default did not of itself establish entitlement, and that the burden rested on the Appellant [114].
On the second issue, the Tribunal held that agency requires the consent of both principal and agent and the authority of the agent to alter the principal's legal relations with third parties [117]. The Tribunal found that Clause 13 of the Production and Sale Agreement expressly negated any authority to bind [122], that the Appellant purchases Basic Seeds for value and sells products with title passing to Syngenta B.V., and bears warranty, indemnity and insurance risk [123], [124], [125]. The Tribunal found the control provisions regulated the subject matter of production rather than the legal capacity of the Appellant [126], [128]. The Tribunal distinguished Dutch Flower Group Kenya on the basis that no equivalent right to inspect the Appellant's books of account existed [129], [130]. The Tribunal found the R&D Services Agreement contained a materially identical independent-contractor stipulation and imposed defect liability on the Appellant [131], [132]. The Tribunal held that the proviso to Section 13(5) of the VAT Act was inapplicable and that the amounts agreed were exclusive of VAT [137], [138]. The Tribunal found the Appellant is not an agent of Syngenta Seeds B.V. or Syngenta Crop Protection AG [140].
The Tribunal held it was not bound by stare decisis to follow its own prior decisions where the facts and evidence materially differ, that no res judicata arose, and distinguished TAT E1064 of 2024 on the basis of a materially different evidentiary matrix, the absence of analysis of key clauses in the earlier decision, and the change in the Appellant's business in 2023 [142], [143], [144].
On the third issue, the Tribunal found that the exportation of vegetable seeds to Syngenta B.V. is zero-rated and evidenced by sales invoices and customs entries [147]. The Tribunal found the R&D services were used and consumed outside Kenya and were exported taxable services, zero-rated, and that the determinant of an exported service is the place of use or consumption, not the place of performance [148], [149], [150]. The Tribunal was satisfied that the documentary burden of proof was discharged, that the evidentiary burden shifted to the Respondent which did not controvert the documentation, and that the claims were lodged within twelve months [154], [155], [156]. The Tribunal held the Appellant was entitled to the refund claims of Kshs. 41,741,294.00 [157].
Outcome
The Tribunal found the appeal meritorious and allowed it. The Respondent's VAT Claim Rejection Orders dated 28 July 2025 and 7 August 2025 were set aside in their entirety [158].
The Respondent was directed to process the Appellant's VAT refund claims amounting to Kshs. 41,741,294.00 for the tax periods of July 2024 to November 2024, January 2025, March 2025, April 2025 and June 2025 in accordance with Section 47(5) of the Tax Procedures Act within sixty days of the date of delivery of the Judgment. Each party was to bear its own costs [158].
Tp method highlighted
The Appellant applied the cost-plus method, described as one of the recognised transfer pricing methods under Rule 7(c) of the Income Tax (Transfer Pricing) Rules as read with Rule 4, to give effect to the arm's length principle and open market value requirements under Section 18(3) of the Income Tax Act and Section 13 of the VAT Act [14], [51], [63].
Under the cost-plus model, the Appellant summed its costs exclusive of VAT and applied an agreed mark-up governed by the arm's length principle for onward billing to Syngenta B.V. and Syngenta SCP [16]. The reimbursable costs included utilities, salaries, maintenance, storage, insurance and idle capacity, plus a 5% mark-up [16], [75], [83].
The Tribunal held that the composition of the cost base, including idle capacity and depreciation, was a matter of computing an arm's length price and did not transform a sale into a disbursement made on another's behalf, and that it cannot be the law that every member of a multinational group remunerated on a compliant cost-plus basis is for that reason the agent of its related counterparty [134], [135].
Major issues / areas of contention
- Whether the Respondent discharged its statutory mandate under Section 47 of the Tax Procedures Act in rejecting the VAT refund claims.
- Whether the Appellant is an agent of Syngenta Seeds B.V. and Syngenta Crop Protection AG.
- Whether the Tribunal's earlier decision in TAT E1064 of 2024 governs the present appeal.
- Whether the Appellant's supplies of exported vegetable seeds and R&D services qualify as zero-rated supplies.
- Whether the Appellant discharged the documentary burden of proof for the input VAT claimed.
- Whether the Appellant is entitled to the VAT refund claims amounting to Kshs. 41,741,294.00.