ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø

This alert highlights the Court of Appeal’s judgment delivered on 21 March 2025, in the case of Kenya Revenue Authority v. David Mwangi Ndegwa Civil Appeal No.65 of 2019.

On 21 March 2025, the Court of Appeal (CoA) delivered a significant judgment in this case. In the precedent-setting decision, the CoA overturned a High Court ruling that had declared that Value Added Tax (VAT) was not payable on the sale of commercial property. 

In 2013, David Mwangi Ndegwa (The Respondent) purchased a property in Kiambu from Standard Chartered Bank Kenya for KES 70,000,050. The property was sold with buildings and improvements erected thereon.

Following the transaction, KRA demanded 16% VAT amounting to KES 11,200,080 on the transaction. The Respondent objected to the demand, arguing that the transaction was not subject to VAT. He was however compelled to pay the VAT, albeit under protest, by the vendor’s advocates to complete the transfer.

The Respondent subsequently engaged the KRA requesting for a refund of the VAT paid on purchase of the property. KRA declined. The Respondent, aggrieved by KRA’s decision, moved to the High Court seeking a determination that no VAT was chargeable on the purchase of the commercial property under the VAT Act, 2013.

The High Court, on 29 November 2018 held that no VAT was chargeable on the sale of land, whether the premises thereon were residential or commercial. Accordingly, the Court ordered KRA to refund the VAT that David Mwangi had paid upon purchase of the commercial premises from Standard Chartered Bank. Aggrieved by the High Court’s decision, KRA appealed to the Court of Appeal.

The Appellants arguments, the Respondent’s arguments, issues for determination, the Court of Appeal’s determination and our opinion on the judgement have all been summarised below.

ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø is happy to assist on any issues arising from this judgement. If you have any questions, please do not hesitate to reach out to our tax team on  [email protected].