Taxpayers with tax balances and available Value Added Tax (VAT) credits have received major relief after the Tax Appeals Tribunal ruled that the Kenya Revenue Authority (KRA) should offset tax debts using available tax credits before resorting to enforcement measures.

🇰🇪 Breaking It Down

The ruling arose between a particular company and KRA in which the company had an outstanding VAT liability of Ksh12.86 million while holding an available VAT credit of Ksh19.71 million.

The company asked the taxman to have the outstanding VAT liability offset using its available credit under Section 47 of the Tax Procedures Act.

However, KRA declined to process the request and proceeded with enforcement action, including issuing agency notices to the company's bank accounts.

📌 What You Need to Know

According to the authority, the Ksh19.71 million constituted excess input VAT governed by Section 17 (5) of the VAT Act, which provides for excess input tax to be carried forward to the next tax period.

KRA declined to use the VAT credit to offset the liabilities, maintaining that the credit could not simply be used to offset the company's outstanding liability.

The authority's decision was challenged before the Tribunal, with the company arguing that it had sufficient VAT credit to settle the outstanding tax fully and that KRA should have considered its set-off application before taking enforcement action.

In its ruling delivered on July 27, 2026, the Tribunal rejected KRA's interpretation.

According to the Tribunal, Section 47 of the Tax Procedures Act gives the Commissioner statutory power to apply an available tax credit towards an existing tax liability where circumstances justify the set-off.

"The Tribunal therefore finds no reason for the Respondent to resort to enforcement mechanism while it had within its reach available VAT credit nor did it substantiate why denying the Applicant a Tax Compliance Certificate was justified," the Tribunal ruled.

📰 Source: Kenyans.co.ke