The Kenya Revenue Authority (KRA) could gain sweeping powers to freeze a taxpayer’s bank accounts or assets even where the disputed tax assessment is under appeal, should Parliament approve the Finance Bill 2026 in its current form.
The Finance Bill 2026, which Treasury has tabled before the National Assembly, seeks to amend the Tax Procedures Act by deleting a clause that currently shields taxpayers involved in disputes with the KRA from being issued with agency notices once they have formally appealed the taxman’s decision.
An agency notice is a directive issued by the taxman under Section 42 of the Tax Procedures Act, compelling a third party, such as a bank or employer, to recover unpaid taxes from a defaulter’s account and remit them to the KRA.
The proposed amendment is likely to rekindle long-running disputes between taxpayers and the KRA over the taxman’s use of agency notices to freeze bank accounts before disputes are fully determined by courts and the Tax Appeals Tribunal.
Clients seeking services at KRA headquarters, Times Tower, Nairobi.
Photo credit: File | Nation Media Group
“Section 42 of the Tax Procedures Act is amended in subsection (14) by deleting paragraph (e),” reads part of the Finance Bill 2026.
Paragraph (e) bars the KRA Commissioner from issuing agency notices if the taxpayer has appealed against an assessment. KRA issues a tax assessment, or liability, in the event of a dispute, inviting the taxpayer either to accept or reject it.
Even where the taxpayer rejects the assessment, KRA still considers the debt due and can proceed to issue agency notices to banks or other income streams linked to the taxpayer.
Tax experts reckon that should the National Assembly approve the deletion, it would mean that whether or not a taxpayer appeals a tax assessment, the KRA would still be free to issue an agency notice.
This is the fifth time the National Treasury has attempted to introduce this amendment. The first time, it came with a rider requiring taxpayers to first pay 50 per cent of the assessed tax before appealing. The threshold was later reduced to 20 per cent before the riders were eventually dropped altogether.
“If the previous attempts were rejected, why does it keep coming back?” wondered Robert Waruiru, the tax partner at Igeria and Ngugi Advocates.
The High Court recently dealt a blow to aggressive debt recovery methods used by the KRA, blocking the agency from directly raiding taxpayers’ bank accounts to recover dues, citing violations of due process.
The court nullified agency notices issued to NCBA Bank Kenya and Stanbic Bank Kenya, which had been directed to remit funds held in accounts belonging to Katahira & Engineers International Limited.
Mr Waruiru speculates that Kenya might be borrowing from positions adopted in Uganda and Tanzania. In Uganda, a taxpayer pays an agreed amount with the Commissioner, while in Tanzania, the tax authority withholds a third of the assessed tax.
There are fears that this provision could be abused, especially if the KRA fails to expeditiously refund money collected from taxpayers who later win their appeals.
“For businesspeople, the issue is that you are pulling cash out of my business, so I have to borrow to get cash. Why?” wondered Waruiru.
