The High Court has overturned a Sh221 million tax assessment against East African Seed Company, handing the agribusiness a major victory in a dispute over value-added tax and withholding tax liabilities linked to a 2020 corporate restructuring.
The court set aside a decision by the Tax Appeals Tribunal and an earlier objection decision by the Kenya Revenue Authority (KRA), finding that the company had provided sufficient evidence to support its position on several contested tax issues.
The dispute arose after KRA assessed East African Seed for Sh221.2 million in VAT and other tax liabilities following an audit covering the period between 2016 and 2020.
A major issue was the transfer of the company's seed business to Agriscope Africa Limited in April 2020.
KRA argued that the deal attracted VAT because it was not adequately proven that the transfer occurred before April 25, 2020, when amendments to tax law made transfers of businesses as going concerns subject to VAT at 16 percent.
The tax authority questioned the timing of key documents and pointed to inconsistencies in invoice dates and transaction records. It argued that the company had failed to prove that the transfer took place before the legal change took effect.
East African Seed maintained that the deal was completed on April 21, 2020, four days before the law changed.
The company told the court that it had transferred assets, liabilities, employees, trademarks, goodwill, and its business operations to Agriscope, and had promptly notified KRA of the transaction.
The court ruled that the company had sufficiently demonstrated that the business transfer occurred before the tax law change and that it qualified for VAT exemption. It added that KRA and the Tax Appeals Tribunal had failed to properly evaluate the company's evidence on VAT, withholding tax, and customs-related assessments.
“I find that the appellant discharged its burden with contemporaneous documents which all bore dates before the effective date and that the tribunal placed undue weight on minor anomalies while under-weighting the evidence before it,” the court said in the judgment dated June 19, 2026.
It found that the transaction qualified as a transfer of a business as a going concern and was therefore exempt from VAT under the law then in force.
The court also faulted the tribunal for rejecting the company's claims on input VAT apportionment.
In addition, the court said East African Seed had provided reconciliation schedules supporting its tax position and that neither the law nor KRA had required audited accounts as a condition for considering those records.
“Since neither the law nor the Commissioner expressly required audited accounts for this purpose, the Tribunal and the Commissioner had no valid reason to reject or not consider the Appellant’s reconciliation schedule,” it said.
The ruling further addressed disputes over import data variances identified through the KRA’s Simba customs system.
KRA had argued that discrepancies between import records, VAT returns, and financial statements justified additional tax assessments.
However, the court found that East African Seed had supplied supporting documents, including customs forms, tax records, and reconciliations, and that the evidence had not been properly evaluated.
It also overturned KRA's withholding income tax demand for the period between 2016 and 2019.
The court held that the tribunal failed to address a legal gap that existed after Parliament repealed provisions allowing KRA to recover unwithheld tax from a payer before similar powers were reintroduced in 2019.
Further, the court rejected KRA's attempt to impose withholding VAT liabilities for 2016, finding that the retrospective application of the law raised concerns about legal certainty and could expose taxpayers to double taxation.
