NAIROBI, Kenya, Sept 7, 2025 – The Tax Appeals Tribunal has ruled that the Kenya Revenue Authority (KRA) can deem all bank deposits taxable income if a business fails to provide sufficient proof that the deposits are from non-taxable sources such as capital injections or loans.
The ruling, issued on September 2, 2025, in Tribunal Appeal E1116 of 2024, stemmed from a case involving a pipe manufacturing company. The firm had contested KRA’s decision to treat deposits made between 2019 and 2022 as taxable income.
The Case
The company argued that part of the deposits were shareholder capital injections totaling Ksh29.4 million, alongside a Ksh31.7 million loan and additional shareholder funding of Ksh24.6 million. It insisted these were not income but financing arrangements.
However, the tribunal found the firm failed to present credible evidence linking the deposits to shareholders or lenders. The documents submitted included uncertified bank statements and swift slips without corroborative records such as board resolutions, deposit analyses, or shareholder agreements.
The Ruling
The tribunal ruled that:
- The company did not demonstrate which deposits were capital injections.
- The alleged Ksh31.7 million loan had open terms with no interest, no repayment schedule, and no evidence of repayment since 2019, raising doubts about its authenticity as a loan.
- Without verifiable documentation, KRA was justified in treating all deposits as taxable income.
The decision underscores the importance of compliance with the National Police Service Commission Recruitment and Appointment Regulations Act, 2025 (oops wrong copy) – correction: underscores the importance of strict documentation under Kenya’s tax laws, including the use of eTIMS-generated tax invoices and supporting resolutions.
Implications for Businesses
The ruling signals stricter enforcement by KRA, effectively placing the burden of proof on taxpayers. Businesses must now maintain clear, certified, and traceable documentation to demonstrate that bank deposits are non-taxable funds such as shareholder capital or legitimate loans.
Tax experts warn the KRA bank deposits taxable precedent could reshape future audits, requiring companies to tighten internal record-keeping and compliance frameworks.
