Tax Dispute Resolution Process: The Notice Of Objection

The Tax Dispute Resolution Process: The Notice of Objection

Receiving a notice of assessment from the Kenya Revenue Authority (the “KRA”) is undoubtedly a stressful period for any taxpayer. The notice of assessment formally kick starts the tax dispute resolution process. The assessment is ordinarily issued after the KRA has conducted a tax audit on the taxpayer pursuant to the provisions of the Tax Procedures Act 2015 (the “TPA”).

Once an assessment is issued, the TPA grants the taxpayer a 30 day period within which to lodge a notice of objection to the assessment.

The Notice of Objection

The objection is the official document prepared by the taxpayer or their representative to object to the tax assessment by the KRA.
The objection is deemed to be validly lodged if:

i. It is in writing;
ii. It is lodged within 30 days from the date of the assessment;
iii. The taxes not in dispute are paid or applied for an extension of time to pay the taxes not in dispute;
iv. It specifies the grounds of objection; and
v. It is accompanied by documents in support of the grounds of objection.

Be in writing

This requirement provides a record of the taxpayer’s objection. Simply visiting the KRA offices and having an oral discussion with the assessing officers is irrelevant under the law. It is incumbent upon the taxpayer to reduce their grounds of objection into writing.

Lodged within 30 days

The TPA places strict timelines for lodging the objection being 30 days from the date of the assessment. Failure to do so within the timelines gives the KRA the liberty to institute enforcement measures to recover the assessed taxes.
*The Tax Procedures (Amendment) Bill, 2024 has proposed to exclude weekends and public holidays in the computation of time for lodging an objection.*

Payment of the taxes not in dispute

In the event that the taxpayer agrees with part of the assessment, then at the point of lodging the objection, they should have either paid or requested for time to pay the taxes not in dispute. The taxpayer at this point has room to maneuver in that they can enter into a payment plan with the KRA if it is unable to make an immediate payment of the conceded taxes.

Specifying the grounds of objection

In the ordinary course of running a business, the taxpayer is subject to various tax liabilities which include, but not limited to, income tax, pay as you earn (PAYE) and value added tax (VAT).
The KRA, when issuing the assessment, specifies the tax liability and the period to which it relates which period should not exceed 5 years, in the absence of fraud or willful neglect.

The Taxpayer should thus avoid generalizing the issues and address succinctly the issues in contention when preparing the objection .Each ground of objection should specifically outline the legal and factual issues in contention by, inter alia:

i. Disputing over the interpretation of tax laws;
ii. Highlighting errors in the calculation of tax liability; and
iii. Outlining factual inaccuracies in the underlying data or records used by the KRA; and
iv. Asserting the correct tax position supported by records held by the taxpayer and tax laws.

Providing the relevant documentation

This ties up with the requirement of specifying the grounds of objection. The taxpayer is required to provide documents to the KRA to support their position. The necessity of having a proper and reliable book keeping system cannot be overemphasized. This will allow easy retrieval of the necessary documents and evidence to support the objection.

Under tax laws, it is the taxpayer who bears the burden of proving that the KRA’s assessment is incorrect. It is therefore incumbent upon the taxpayer to be properly equipped with evidence to support the objection.

Process where an objection is deemed invalidly lodged

Upon receiving the objection, the KRA must first consider whether the objection has been validly lodged. If the objection is not lodged within the 30 days, then the taxpayer should make a request for an extension of time whilst providing reasons for the late filing. The KRA is at liberty to accept or reject the application.

If the objection is deemed to be invalid but lodged within the 30 days, the KRA must communicate to the taxpayer within 14 days of the objection and request the taxpayer to validate the objection within 7 days of the notification. If the taxpayer fails to abide by KRA’s request, then KRA will adopt the Objection as it is and issue the objection decision within 60 days.

In our next series, we will debunk the objection decision stage.


*This legal alert is for information purposes only. Legal advice should be sought on the views expressed herein