On 5 February 2019, the Kenyan Court of Appeal issued its ruling on: Kenya Revenue Authority v. The Republic of Kenya (ex parte Fintel Limited). In this case, the Court of Appeal overruled the decision of the High Court that the withholding tax becomes due upon recovery and payment.
Previously, the Kenya Revenue Authority (KRA) had appealed a High Court judicial review decision in 2012 in which the court held that an actual payment in cash is a prerequisite for withholding tax to be applicable and an accrual of a money obligation (for example, the obligation to pay interest under a shareholder loan) would not result in withholding tax being applicable. The High Court defined payment as “the delivery of money or other valuable thing,” indicating that for the application of withholding tax an actual payment must be made by a taxpayer.
The Court observed that while the words ”upon payment” in their colloquial and ordinary parlance suggest being given money for something in exchange, the ITA must be the source of the meaning to be attached to such words, by giving them context. The Court emphasized that the ITA had given the word “paid” a technical definition contrary to the ordinary definition.
Finally, the Court found that the income tax system is based on the accounting system demonstrated in different sections of the ITA.
