The Tax Appeals Tribunal is Kenya’s principal forum for resolving tax disputes, and its decisions form an increasingly important body of precedent. Several rulings from late 2025 and early 2026 carry direct practical lessons for businesses, whether on transfer pricing methodology, the procedural standards KRA assessments must meet, or the deductibility of core financial costs.
Ruling 1: Loan Principal Is Deductible for Lenders
In a significant decision for financial institutions and fintech lenders, the Tribunal ruled that the principal component of written-off loans constitutes revenue expenditure and is therefore deductible for tax purposes. The KRA had argued the opposite, relying on Legal Notice 37 of 2011 to disallow the deduction on the basis that the principal is capital in nature.
The Tribunal rejected that position, holding that for a business whose core activity is lending, loans are stock-in-trade. The money that goes out as loans is the product that generates the business’s income. The principal is circulating capital, not fixed capital, and disallowing its write-off would be inconsistent with the economic reality of how a lender operates.
This ruling has direct relevance for banks, microfinance institutions, SACCOs, and fintech lenders managing non-performing loan portfolios and bad debt provisions under IFRS 9.
Ruling 2: KRA Assessments Must Disclose Their Basis
The Tribunal invalidated a KRA default assessment on procedural grounds, finding that the assessment failed to disclose its basis and computation as required by Section 29 of the Tax Procedures Act. The Tribunal found KRA’s conduct procedurally unfair and inconsistent with both the statutory requirements and the constitutional right to a fair hearing.
This ruling reinforces a key principle: a taxpayer is entitled to know the factual and legal basis on which they are being assessed before they can mount a proper objection. Bare assessments that state only a liability figure, without explaining how it was arrived at, are at risk of being struck down.
If you have received a KRA assessment that does not explain its basis or computation, raise a formal objection on procedural grounds immediately and within the statutory time limit.
Ruling 3: Transfer Pricing Benchmarking Standards
Several recent TAT decisions in transfer pricing matters confirm a clear pattern: while KRA bears a threshold burden of justifying its adjustments, taxpayers must produce robust and contemporaneous benchmarking analysis to successfully challenge KRA’s position.
Cases involving the choice between the Transactional Net Margin Method and the Resale Price Method, and disputes about interquartile range selection, have underscored the importance of well-documented comparable searches and transparent methodology. The Tribunal has shown willingness to carefully scrutinise the statistics used by both KRA and taxpayers, including median selection and the treatment of adjustments for functional differences. Taxpayers whose transfer pricing files lack this depth are at a genuine disadvantage in litigation.
The Takeaway for Businesses
These rulings point in a consistent direction: procedural compliance on both sides is as important as the underlying tax position. Businesses should ensure that objections and appeals are filed correctly and within time, that KRA assessments are challenged where they lack the required disclosure of basis, and that transfer pricing files are maintained to a standard that would hold up under Tribunal scrutiny.
Intelpoint Consulting provides tax dispute support covering objection drafting, Tribunal preparation, and advisory support on KRA audit responses. If you have an open matter with the KRA or a pending Tribunal case, contact us to discuss how we can help.
Contact Intelpoint Consulting: www.intelpointconsulting.com