Standard Chartered Bank Kenya has suffered a setback in its tax battle with the Kenya Revenue Authority (KRA) after the Tax Appeal Tribunal ruled that the lender did not use a proper channel in seeking a refund of excess payment to the taxman.
“The view of the tribunal is that the grounds of the appeal before it are not arguable on the basis that the issues raised for determination were not bonafide (genuine) thereby making the instant appeal incompetent,” the tribunal chaired by Catherine Muga said in a March 14, 2025 decision.
“The tribunal further notes that the incompetence can be said to be in layers in that, other factors also make this appeal incompetent. The second factor is that prior to 2022, a refund decision was not an appealable decision and the third is that since there was no refund application made by the appellant in the first place, the letter dated February 27, 2024 is without basis” it added.
The dispute between the bank and the tax authority dates back to its 2019 tax filings, where it declared a corporate income tax overpayment of Sh832.9 million.
In June 2020, Standard Chartered attempted to offset a portion of this overpayment, Sh80.6 million, against its 2020 installment tax liability.
However, KRA refused the offset, arguing that the bank could not utilise the excess amount without first applying for a formal refund and having it validated.
On June 26, 2020, KRA issued a demand letter instructing the bank to pay the full amount due for the 2020 installment tax, ignoring its attempted offset. The bank protested, saying the law did not bar taxpayers from directly using overpayments to settle future liabilities.
When the taxman failed to respond, Standard assumed its position had been accepted.
However, the dispute resurfaced in February 2024 when KRA partially approved the bank’s refund claim, recognizing Sh868 million out of the Sh913.5 million sought.
The tax authority, however, deducted Sh45,489,854 in penalties and interest, reasoning that the bank had underpaid its 2020 taxes. Aggrieved by this decision, the bank filed an appeal before the tax tribunal.
Standard Chartered Bank told the tribunal that KRA had acted unlawfully by imposing penalties and interest on an overpaid tax amount. The bank argued that Section 89(3) of the TPA required the tax authority to notify a taxpayer in writing before recovering any penalties or interest, a step it claimed KRA had skipped.
The bank also challenged the taxman’s stance that overpayments could only be accessed through the refund process. According to the bank, past practice had allowed taxpayers to offset such amounts without undergoing a refund application. By insisting on a formal refund process, in the bank’s view, KRA misapplied Section 47 of the TPA.
In defense, KRA insisted that it acted within the law, arguing that the Tax Procedures Act clearly outlines overpayments must go through a formal refund process.
The tax authority also accused the bank of failing to follow the correct procedures, stating that it had not submitted a refund application in the required format.
KRA also argued that its assessments had been fair and based on reconciliations of the bank’s declared VAT on custodial fees, where it found a discrepancy of Sh1.49 million. It stated that Standard Chartered had underreported its obligations and failed to provide proper documentation to counter the assessments.
The tribunal found that Standard Chartered had failed to follow the refund process stipulated in Section 47 of the TPA, rendering its claims invalid. It dismissed the argument that the bank could offset overpaid tax without validation.
“The tribunal notes that other than a letter dated February 27, 2024, which is a summary of the audit findings by the respondent, there was no correspondence or other documentary evidence adduced by the appellant to prove that it had made an application for the refund in an approved format,” the tribunal said.
