Kenya’s Tax Appeals Tribunal has ruled that loss carryforward restrictions introduced by the Finance Act 2025 cannot be applied retrospectively, overturning a KES 67.9 million assessment and affirming statutory time limits and taxpayers’ legitimate expectations.
Kenya’s Tax Appeals Tribunal delivered its decision in Patel v Commissioner for Legal Services & Board Co-ordination Services on 28 November 2025, which addresses how the loss carryforward restriction introduced under the Finance Act 2025 should be applied.
The case presents a judgment from the Tax Tribunal in Nairobi in a dispute between Vijay Kumar Shamji Patel and the Kenya Revenue Authority (KRA). The conflict arose after the tax authority issued an assessment of over KES 67 million, primarily by disallowing tax losses that the taxpayer had been carrying forward since 2014.
While the tax authority alleged willful neglect to justify reopening older tax years, the taxpayer argued that the claims were statutorily time-barred and violated his legitimate expectations based on previous audits.
The Tax Tribunal ruled in favour of the Appellant, Vijay Kumar Shamji Patel, setting aside a KES 67,932,696 tax assessment that had disallowed substantial losses carried forward from 2014.
The Tribunal determined that the Respondent’s assessment was statutorily time-barred under Section 31(4) of the Tax Procedures Act because the Kenya Revenue Authority failed to provide cogent evidence of “gross or willful neglect,” fraud, or evasion sufficient to reopen tax years beyond the standard five-year limit.
Furthermore, the judgment held that the Appellant had a legitimate expectation of compliance because the Respondent had conducted four previous audits between 2020 and 2024 without issuing adverse findings, and it ruled that the Finance Act 2025 could not be applied retroactively to extinguish tax losses accrued under former, more permissive regimes. Ultimately, the Tribunal found the Respondent’s actions unjustified and unlawful, resulting in the entire assessment being vacated.
