KRA ordered to refund KLM millions after years of duel

KLM planes parked at the Schiphol Airport, in the outskirts of Amsterdam, on March 18, 2020. PHOTO | AFP

The Kenya Revenue Authority (KRA) has been ordered to refund KLM Royal Dutch Airlines Sh2.7 million VAT claims, which the airline has been seeking since 2017.

The tax appeals tribunal gave the taxman 90 days from the date of judgment to refund the Dutch airline the money, saying it would be against the principle of justice and fairness for the KRA to reject the request for refund, after admitting system failure in processing refunds for March 2017.

The airline filed the appeal after KRA dismissed its request on the basis that it had used the refund for a non-existent VAT liability in April 2017.

The airline submitted that its business is zero-rated and Royal Dutch Airline lodged the refund claim within the 12 months from the dates the inputs became due and payable.

“In view of the foregoing, the Tribunal finds that the Appellant’s refund claim for the month of March 2017 is payable,” the Tribunal chaired by Robert Mutuma ruled.

The tribunal was informed that the airline lodged an online VAT refund claim butthe KRA rejected the refund claim.

The airline filed the appeal arguing that the KRA erred in rejecting the claim.

The company submitted that its services are zero-rated as it transports passengers on international flights

Royal Dutch Airlines further said KRA wrongfully ignored the recommendations under the OECD Guidelines on neutrality of VAT before rejecting the refund claim.

It was the airline’s contention that the OECD guidelines sufficiently recommend the refund of input VAT incurred by foreign businesses like the airline and the guidelines have been used in several cases involving the respondent touching on the interpretation of VAT laws.

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