Nairobi County has secured a major reprieve after the Tax Appeals Tribunal struck out most of a disputed Sh8.3 billion tax claim issued by the Kenya Revenue Authority following a lengthy dispute over tax obligations dating back to 2019.
The ruling delivered on May 8, 2027 found that KRA failed to properly consider reconciled records and supporting documents presented by the county government during the review of the contested taxes.
“The Respondent’s assessment was grossly misstated, without due regard for reconciling items,” the Tribunal stated in part of the judgment, while also criticizing the tax authority for overlooking findings reached during reconciliation meetings involving both parties.
The dispute stemmed from a compliance audit conducted by KRA on Nairobi County for the period between 2019 and 2023. Following the review, the authority issued tax assessments exceeding Sh8.2 billion over alleged unpaid PAYE, withholding VAT, withholding income tax, VAT linked to county revenue streams and NITA levies.
Nairobi County disputed the figures and moved to challenge the assessment, arguing that the tax demand contained repeated invoices, cancelled transactions, exempt supplies, internal transfers and payments that had already been settled.
According to the county government, some of the figures included in the final assessment had already been addressed and reconciled during engagements held with KRA officials before the matter escalated into a formal dispute.
After reviewing the case, the Tribunal ruled in favour of the county on most of the contested claims and dismissed the larger part of the assessment issued by the tax authority.
The Tribunal, however, retained the NITA levy component and upheld a reconciled liability amounting to Sh130.7 million that had earlier been agreed upon by both sides during reconciliation talks.
“The reconciled liability of Kshs 130,689,334.10 was confirmed,” the ruling stated, adding that the remaining disputed assessments could not be sustained in their present form.
The decision now deals a blow to KRA’s attempt to recover the multi-billion shilling claim and hands Nairobi County a major win in one of the largest tax disputes involving a devolved unit.