High Court Judge John Mativo who has issued restraining appointed board members from assuming office.


Motor bikes supplier Mars Logistics Limited will now pay Sh105 million taxes to Kenya Revenue Authority.

The taxes were not paid between 2013 and 2015.

Justice John Mativo said under the VAT Act, 2013, goods in transit were not zero-rated nor was it exempted from VAT as claimed by the company.

“I find no basis to fault the Tribunal’s findings. Accordingly, I find that this appeal fails. The upshot is that I dismiss this appeal with no orders as to costs”, ruled the judge.

While dismissing the case, the judge said that the Tax Appeals Tribunal (TAT) correctly held that to qualify for zero-rated status, the service should have been specifically provided for in the law.

In his 29 page ruling, the judge noted that the Tribunal correctly held that the VAT Act, 2013 came into force on September 2, 2013 thereby removing the exempt status of the sale of motorbikes, hence the appellant was not entitled to claim exempt status on the invoice dated September 11 2016.

The company had appealed a decision of the TAT, dismissing its case and maintained that a levy of VAT on goods on transit amounted to double taxation.

Mars Logistics argued that it was wrong for KRA to impose VAT at 16 per cent on services for goods in transit. The company maintained that goods in transit were previously zero rated under the repealed Act.

But KRA said the company was not entitled to claim exempt status because no documentary evidence was provided to show that the payment was made in April 2013.

Further, the court heard that VAT Act 2013 came into force on September 2, 2013 thereby removing the motor bikes from the exempt status.

KRA also argued that levying tax on transport does not amount to double taxation because the transport cost is considered as an allowable expense by the importer at the destination if any.

The High Court also dismissed the company’s contention that the provisions of the Finance Act, 2014 on exemption from VAT of supply of services in respect of goods in transit, as read together with the VAT Act, 2013 created ambiguity.

He said that when a transaction involves goods being moved from one jurisdiction to another, the exported goods are generally free of VAT in the seller’s jurisdiction (and are freed of any input VAT via successive businesses’ deductions of input tax), whilst the imports are subject to the same VAT as equivalent domestic goods in the purchaser’s jurisdiction.

The VAT on imports is generally collected from the importer at the same time as customs duties, before the goods are released from customs control.

“Allowing deduction of the VAT incurred at importation in the same way as input tax deduction on a domestic supply ensures neutrality and limits distortions in relation to international trade”, He said.

The application of the destination principle in VAT achieves neutrality in international trade. Accordingly, the total tax paid in relation to a supply is determined by the rules applicable in the jurisdiction of consumption and therefore all revenue accrues to the jurisdiction where the supply to the final consumer occurs. In this regard and found no basis to fault the Tribunal’s findings on this issue.

Justice Mativo found that the transport services were consumed in Kenya and not exported services, hence taxable.

In the decision, Justice Mativo noted that the company relied on petty cash vouchers to support its claim. “The law as I understand it is that the onus lies on the appellant (Mars Logistics) to persuade the Commissioner that the expenses were incurred. In my view, the appellant failed to discharge the burden to the satisfaction of the commissioner by relying on petty cash vouchers instead of receipt,” he said and dismissed the appeal.

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