Judgment summary
The Tribunal considered an appeal by Wiocc Services Kenya Limited against the Commissioner's rejection of VAT refund claims for the periods 2018 to 2024. The Commissioner had rejected the claims on the basis that the Appellant acted as an agent of its Mauritius parent, WIOCC Mauritius, and that the 2021 refund claim was time-barred (paras 3-6, 38-45).
The Tribunal examined the Management Service Agreement between the parties and found that the Appellant acted as an independent contractor and not as an agent of WIOCC Mauritius (paras 61, 64, 66-67).
Having found no agency relationship, the Tribunal held that the Respondent was not justified in rejecting the Appellant's input VAT refund claims (paras 68-72). The Tribunal also found that the 2021 VAT refund claim was not time-barred, as it had originally been lodged within statutory timelines but was rejected due to errors in the Respondent's own system (paras 73-77).
The Tribunal allowed the appeal and set aside the Respondent's rejection orders for the periods 2018 to 2024, with each party to bear its own costs (paras 78-79).
Background
The Appellant is a limited liability company incorporated in Kenya in 2017 after taking over the operations of WIOCC Kenya Branch. Its principal activity is the provision of business support services to its parent entity, WIOCC Mauritius, domiciled in Mauritius (para 1).
The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act Cap 469 Laws of Kenya, mandated under Sections 5(1) and 5(2) to collect and account for revenue (para 2).
The Appellant lodged a VAT refund claim for the period January 2021 to June 2021 on 29th September 2021, which was rejected due to a pending debt status in the Respondent's system (para 3).
The issue was later resolved and the Appellant submitted a new application for VAT refund on 8th September 2025. The Respondent issued rejection orders on 26th January 2026, 16th February 2026 and 9th February 2026 (para 4).
The Appellant filed its Notice of Appeal dated 6th March 2026 and its Memorandum of Appeal dated and filed on the same date (paras 5-6).
Core dispute
The appeal concerned two main grounds. First, whether the Respondent erred in deeming the Appellant an agent of WIOCC Mauritius, thereby disallowing input VAT deductions under Section 13(5) of the VAT Act on the basis that the Appellant's costs were fully reimbursed by its parent (paras 6a, 40-42, 47-49).
Second, whether the Respondent erred in deeming the Appellant's 2021 VAT refund application as time-barred under Section 17(5)(d) of the VAT Act as amended by the Finance Act 2022, given that the Appellant contended it had lodged its claims within statutory timelines and that re-applications were necessitated by the Respondent's own errors (paras 6b, 44-45, 53-54).
The Appellant relied on the Profit Split Transfer Pricing method to argue it participated in residual group profits and bore economic responsibility for its costs, distinguishing this from an agency arrangement (paras 9, 17, 21). The Respondent relied on the Intercompany Agreement and Schedule 2-Service Fees of the Transfer Pricing documentation, asserting that the Appellant was reimbursed 100% of costs and therefore did not bear the economic burden of the expenses (paras 41-42, 48, 52).
Court findings
On the agency issue, the Tribunal examined the Management Service Agreement, particularly clause 3.2, which stated that the Appellant shall at all times act as an independent contractor and that nothing in the Agreement constitutes a principal-agent relationship (para 61). Relying on definitions from Black's Law Dictionary 10th Edition and Bowstead & Reynolds on Agency 21st Edition, the Tribunal found that WIOCC Mauritius did not exercise control over the Appellant, and that the Appellant was not an agent of its parent entity (paras 62-67).
On the input VAT claims, the Tribunal noted that the Respondent's own Objection Decision dated 14th October 2020 had allowed input VAT of Kshs 2,377,217.47 on invoices of Kshs 14,857,609.2, which the Tribunal found implied the Appellant was not an agent. The Tribunal held the Respondent could not do an about turn and disallow expenses on the basis of an agency relationship (paras 70-72).
On the time-bar issue, the Tribunal found that the refund application for 2021 was first lodged within statutory timelines, and that its initial rejection was due to errors in the Respondent's system rather than any fault of the Appellant. The Tribunal held it would be unjust to deny the Appellant consideration of its application on the merits, particularly as the audit trail could be traced in the Respondent's system (paras 75-77).
Outcome
The Tribunal found the appeal meritorious and allowed it. The Respondent's Rejection Orders for the periods 2018, 2019, 2020, 2021, 2022, 2023 and 2024 were set aside. Each party was ordered to bear its own costs (paras 78-79).
Tp method highlighted
The Appellant asserted that it participated in residual group profits remunerated through a Profit Split Method, rather than through commission or cost plus arrangements, and that it bore economic responsibility and paid corporate income tax on the allocated profits (para 17). It argued that a party participating in residual profits could not in law be an agent, since an agent does not participate in entrepreneurial returns or share in business profits but earns facilitation remuneration through commission income (para 17). The Appellant further averred that the Respondent ignored its substantive role in value creation as evidenced by the Profit Split TP method it had adopted (para 21). The Respondent, by contrast, relied on Schedule 2-Service Fees of the Transfer Pricing documentation to argue that the Appellant was reimbursed 100% of all costs incurred, including direct tax implications, under the Intercompany Agreement (paras 41-42, 52).
Major issues / areas of contention
- Whether the Appellant was an agent of its parent entity, WIOCC Mauritius
- Whether the Respondent was justified in rejecting the Appellant's input VAT claims
- Whether the VAT refund claim for 2021 was time barred