Tax Appeals Tribunal Orders KRA to Refund Absa KSh317.2 Million

The Tax Appeals Tribunal ordered the Kenya Revenue Authority to refund Absa Bank Kenya KSh317.2 million in withholding tax collected on card payment fees.

The refund follows a Supreme Court ruling that the fees were not subject to withholding tax under the Income Tax Act.

The dispute involved payments Absa made to Visa International Services Association, Mastercard Inc., American Express Ltd and interchange fees shared with issuing banks.

KRA had originally classified the payments to card companies as royalties and the interchange fees as management or professional fees, which attracted withholding tax.

The matter stemmed from a KRA audit of Absa’s tax affairs for 2007-2010. Absa contested the assessments and the High Court quashed KRA’s decisions in May 2015, barring enforcement.

KRA appealed and the Court of Appeal in November 2020 reversed the High Court ruling, declaring both categories of fees liable to withholding tax. No suspension order was issued and KRA issued a demand for KSh625.9 million comprising KSh317.2 million tax, KSh31.7 million penalties and KSh277 million interest.

Absa paid the principal tax of KSh317.2 million on December 2, 2020 while continuing its appeal to the Supreme Court, stating the payment was made under threat of enforcement and did not constitute acceptance of liability.

On December 5, 2025 the Supreme Court set aside the Court of Appeal findings, holding that the fees were not royalties nor management fees and therefore not subject to withholding tax. The court described the issue as of general public importance with implications for revenue collection and the banking system.

Absa filed a refund application with KRA on February 26, 2026 under the Tax Procedures Act. KRA rejected the request, arguing the tax had been collected when the Court of Appeal judgment was enforceable and that the Supreme Court ruling applied only prospectively, and that the five-year refund period had elapsed.

The Tribunal, hearing the appeal, ruled on November 7, 2026 that KRA’s refusal was unlawful and ordered a refund of KSh317.2 million within 60 days, but denied interest on the amount.

In its judgment the Tribunal rejected KRA’s view that the Supreme Court decision was prospective, stating the apex court clarified existing law and applied it to the 2007-2010 transactions. It quoted that “the court of appeal’s construction was overturned as erroneous”.

The Tribunal noted that KRA had already reduced similar withholding tax assessments to nil for 2017-2022 in April 2026, and rejected KRA’s limitation argument, saying the five-year period starts from the date the tax is overpaid, which the Tribunal set as December 5, 2025. Absa’s application, filed 83 days later, was therefore timely.

The Tribunal also observed that KRA’s positions were contradictory, having waived assessments for later years while refusing to apply the same principle retrospectively to Absa’s earlier payments.