15th October 2026
In a judgment delivered on 9th October 2026 in Tetra Pak Limited v Kenya Revenue Authority & another, the Court of Appeal held that the High Court could hear a complaint about KRA’s delay in processing VAT refunds, that KRA could lawfully set off a refund against tax due without the taxpayer’s consent, and that interest on an approved but unpaid refund accrues by operation of law. The taxpayer still lost both interest and costs, because it had not re-submitted its claim.
On 9th October 2026, the Court of Appeal (Musinga, Lilan and Dr. Okello, JJ.A.) delivered judgment in Tetra Pak Limited v Kenya Revenue Authority & another, Civil Appeal No. E655 of 2023 [2026] KECA 2157 (KLR). The appeal arose from a constitutional petition filed in 2012 over the Kenya Revenue Authority’s failure to process VAT refund claims, a tax demand, and agency notices issued to the taxpayer’s banks. The High Court (Ong’udi, J., as she then was) had dismissed the amended petition in March 2023, holding that the tax issues belonged before the Tax Appeals Tribunal under the Tax Procedures Act, 2015 (the Act) and the Tax Appeals Tribunal Act, and that KRA had not violated the company’s rights under Articles 40 and 47 of the Constitution.
The Court of Appeal disagreed on jurisdiction, but dismissed the appeal all the same. Along the way, it answered four questions that matter to every business with refunds outstanding at KRA: whether the High Court may hear a complaint about a stalled refund, whether withholding a verified refund violated the right to fair administrative action, whether KRA may set off a refund against tax due without the taxpayer’s written consent, and whether interest is payable on a refund that KRA has approved but not paid.
The Dispute
Following an audit in 2011 and 2012, KRA demanded KES 95,008,194 from Tetra Pak Limited, made up of import VAT for 2008 and 2009 that it said had not been paid, VAT it said had been refunded in error, and interest. It refused to set the demand off against the company’s pending refunds, and on 26th September 2012 issued agency notices to the company’s three bankers, which the company complained were issued before the period for objecting to the demand had run. The company filed its petition two days later, complaining principally of KRA’s failure to process refund claims totalling KES 422,219,015.
Over the following years, KRA dropped the claim for VAT refunded in error, reduced its demand to KES 82,885,855, processed part of the refunds, disallowed others, and set the principal import VAT off against approved refunds without the company’s consent. On 20th February 2018, it confirmed that a refund of KES 110,064,398 was due, but directed the company to re-introduce that sum as a credit in its VAT returns. The company did not do so. It amended its petition, seeking an order of mandamus compelling payment, and interest at a commercial rate of 13.5% on its delayed refunds.
The High Court Had Jurisdiction
The Court held that the trial judge had approached the question from an unduly limited standpoint. The amended petition was a continuation of the 2012 petition, and the company’s complaint throughout was the delay in processing its refunds, not the calculations or the verification process. Complaints about the lawfulness of KRA’s administrative conduct were “not strictly speaking tax disputes” as defined in section 3 of the Tax Appeals Tribunal Act.
The doctrine of exhaustion did not change the position. The rule is not absolute, and it may be bypassed where a petition raises fundamental questions about the violation of constitutional rights. The Court relied on Kenya Revenue Authority v Universal Corporation Limited [2014] KECA 1103 (KLR): judicial review is concerned with the legality of the decision-making process, and it remains available despite alternative remedies where the dispute raises questions of public law.
On the complaint that the trial judge had applied the Act retrospectively, the Court restated the presumption against retrospectivity in Samuel Kamau Macharia & another v Kenya Commercial Bank Ltd & 2 others [2012] KESC 8 (KLR). The proper starting point, it held, is the transitional regime in section 113 of the Act, under which it all depends on the stage the matter had reached when the Act came into force.
No Article 47 Violation, but KRA Is “Called Out”
The Court found no violation of the right to fair administrative action, because the parties had been in continuous negotiations. It nevertheless found the company’s original complaints meritorious, observed that KRA had moved with speed only after the petition was filed, and said it “must however call out” KRA for waiting for a petition before fast-tracking the process. As a public body, KRA must endeavour to comply with the statutory timelines.
On the verified refund, KRA had required re-submission in reliance on regulation 8 of the VAT Regulations, 2017 (Legal Notice No. 54 of 2017) and a National Treasury circular. The Court held that re-submission was a “mere procedural requirement.” There was no proof that the company had re-submitted, and its claim for an order of payment therefore failed.
Set-Off Without Consent, and Interest
The company relied on the deleted section 25 of the Kenya Revenue Authority Act, under which a taxpayer could request set-off in writing, arguing that set-off required its written request. The Court agreed with KRA that section 25 did not apply to the company’s case, which concerned import VAT. Section 113(4) of the Act allowed the pre-commencement liability to be recovered under that Act, and section 47(5) required the refund to be applied first to tax owing. The set-off was therefore lawful. (The Court’s reference, at paragraph 174, to “section 45 of the TPA” appears to be a slip for section 47.)
On interest, the Court held that once a refund is approved and is not paid within the statutory timeline, interest accrues by operation of law under section 47, on a principle of reciprocity. KRA is “always very aggressive” in charging taxpayers interest, and the Court applied the same standard to it. None was awarded, because the company had not re-submitted its claim. The appeal was dismissed, and since the company had a valid claim but was “unnecessarily uncomfortable” with the method proposed for the refund, each party bore its own costs in both courts.
The Effect of the Judgment Today
The dispute arose in 2012, under the repealed VAT Act and before the Act came into force. Section 47 of the Act, which the Court applied, has been amended several times since, most recently by the Finance Act, 2025; the Finance Act, 2026 (Act No. 19 of 2026) left it untouched. Each of the Court’s holdings now meets a different statutory landscape as follows:
Jurisdiction meets a direct appeal route. Since the Finance Act, 2022, a person aggrieved by a decision of the Commissioner under section 47 may appeal to the Tax Appeals Tribunal within thirty days of notification (section 47(13)). Since the Finance Act, 2023, a refund decision is also no longer listed as a “tax decision” that must first be objected to under section 51. A refusal, disallowance or adjustment of a refund is therefore a matter for the Tribunal, on a short deadline. The judgment’s distinction between quarrelling with the figure and quarrelling with KRA’s conduct remains important where there is no decision to appeal, such as where an approved refund is simply not paid. Even then, section 9(2) of the Fair Administrative Action Act requires available remedies to be exhausted, unless the court grants an exemption in exceptional circumstances under section 9(4).
KRA’s delay now has a statutory consequence. The inaction the Court “called out” is now addressed by the Act itself. Where a claim falls under section 47, the Commissioner must ascertain and determine it within 120 days, or 180 days where it is audited, failing which it is deemed ascertained and approved (sections 47(2), (3) and (4A)). Deemed approval was introduced by the Finance Act, 2021, and the Finance Act, 2025 extended the periods to their present length.
The interest clock has moved. The rate is not new: section 47 has provided for interest at one per cent a month on unpaid refunds since the Finance Act, 2016. What has changed is the clock. Until 2023, KRA had two years from the date of the application to pay; since the Finance Act, 2023, an ascertained refund must be paid within six months of ascertainment, failing which interest runs at one per cent for each month or part of a month it remains unpaid (sections 47(2)(b) and 47(6)). A claim for a commercial rate, such as the 13.5% sought in this case, finds no footing in section 47. The same paragraph also directs that a refund KRA fails to pay is to be applied against the taxpayer’s outstanding or future liabilities.
Set-off now runs both ways. The holding that KRA may set off without consent stands: section 47(5) still applies a refund first to tax owing under the same tax law, then to tax owing under any other tax law, and refunds only the remainder. But a taxpayer may now itself apply to offset overpaid tax against its outstanding debts and future liabilities, including instalment taxes and VAT payable on imports (section 47(1)(a), as amended by the Finance Act, 2025). That is, in substance, the offset KRA refused in 2012. Once KRA notifies that it has applied the offset, interest and penalties stop accruing on the amount applied (section 47(7)).
Re-submission and the rules. Regulation 8 of the VAT Regulations, 2017, on which KRA relied, remains in force. It prescribes how a refund is computed for a person making both standard-rated and zero-rated supplies, but does not, in terms, require an ascertained refund to be re-submitted. Under today’s section 47, the six-month payment period runs from ascertainment. Whether KRA may require an ascertained claim to be lodged afresh, and so restart that clock, is a question the judgment did not decide.
The windows to claim have narrowed. A refund of overpaid tax must now be claimed within five years for income tax and within twelve months for any other tax (section 47(1)(b)). Excess input VAT refundable under section 17(5) of the VAT Act — whether it arises from zero-rated supplies such as exports or from tax withheld by appointed withholding agents — must be claimed within twelve months of the date the tax became due and payable (section 17(5)(d), reduced from twenty-four months by the Finance Act, 2025). The transitional analysis in section 113 will therefore matter less with time; the deadlines will matter more.
What the Judgment Means
For taxpayers with refunds pending. Each statutory date now carries a legal consequence: twelve months to claim (five years for income tax), 120 or 180 days for KRA to determine, six months to pay, and thirty days to appeal. The record of when a claim was lodged and ascertained is the evidence on which deemed approval and interest will turn.
For taxpayers in dispute with KRA. After fourteen years of litigation, the company was denied both interest and its costs because it did not take a procedural step that it argued had no basis in law. A taxpayer who disagrees with a procedural requirement is usually better off complying under protest and preserving its position than refusing outright.
For KRA. The judgment is a reminder that statutory refund timelines bind the Authority as firmly as payment deadlines bind the taxpayer, and the Act now attaches deemed approval and interest to delay beyond those timelines.
Conclusion
The Tetra Pak decision confirms that the courts will supervise how KRA handles refunds, that legacy disputes are governed by the stage they had reached when the Act came into force, and that interest on an approved refund is a statutory consequence of KRA’s delay rather than a discretionary favour. Read with today’s section 47, its lesson is sharper still: the law now gives taxpayers deemed approval, a payment deadline and interest, but only to those who claim in time, follow the procedure and choose the right forum.
Disclaimer: This legal alert is meant for general information only and should not be construed otherwise. You are hereby advised, in all circumstances, to seek clarification from Victor Kaula (victor@oklawllp.com) or OK Law Advocates LLP (legal@oklawllp.com).