A motor vehicle importer has lost a Sh158 million tax dispute after failing to produce purchase records.
A motor vehicle importer has lost a Sh158 million tax dispute after failing to produce purchase records to prove the actual cost of imported cars, reinforcing the importance of the ‘burden of proof’ principle.
The Tax Appeals Tribunal dismissed a plea by Haque & Sons Investment Limited and upheld value-added tax (VAT) and income tax assessment by the Kenya Revenue Authority (KRA) against the trader.
The Tribunal ruled that the taxpayer did not discharge its burden of proof that KRA’s assessment was incorrect, after it failed to produce documentary evidence showing the actual purchase costs of the vehicles.
It held that the burden of proof remained with the taxpayer throughout the dispute and that merely stating that supporting documents were available was insufficient.
KRA initially issued assessments totalling Sh325.6 million on September 1, 2025, before reducing the amount to Sh158 million after the company’s objection.
Times Tower in Nairobi, the headquarters of the Kenya Revenue Authority (KRA).
The case sounds a caution to businesses to keep transaction records for evidence whenever tax disputes arise.
Haque & Sons, a Kenyan company involved in the import and sale of motor vehicles, said it had under-claimed some purchases despite selling all the vehicles.
The company said supporting documents were available and offered to provide purchase records so the actual cost of the vehicles could be established.
It argued that timely review of those documents would have prevented the dispute from reaching the Tribunal.
KRA said the company had failed to provide purchase documents to establish the vehicles’ actual cost.
The authority said customs values based on Current Retail Selling Prices, together with import taxes and levies, could not establish actual purchase cost.
KRA therefore relied on available information and its statutory power to make an assessment using its best judgment where records were incomplete.
The Tribunal found that Haque & Sons had admitted under-claiming purchases but had not produced documents showing how the omission affected its tax liability.
“The appellant did not attach a single piece of evidence to support its averments to the Tribunal. Without supporting documents, the appellant’s contentions remained mere averments,” the Tribunal said in the judgment dated August 28, 2026.
The Tribunal said tax assessments carry a rebuttable presumption of correctness and placed the burden on the taxpayer to prove the Commissioner’s decision was wrong.
It also found that this burden continues after an objection is filed and remains until the dispute is finally determined.
The ruling is significant for vehicle dealers because it highlights records needed to distinguish customs valuation from the actual cost of vehicles bought for resale. The Tribunal cited laws requiring businesses to keep records of receipts, expenses, goods bought and sold, accounts, contracts and vouchers needed to establish tax liability.
For VAT purposes, required records include purchase invoices, customs entries, customs-duty receipts, tax invoices and stock records. The VAT Act requires such transaction records to be kept for five years from the date of the last entry. The Tribunal stressed that taxpayers must submit relevant documents when lodging objections, rather than merely asserting that evidence exists. The requirement applies throughout the dispute.
It found Haque & Sons had not discharged its statutory burden, dismissed the appeal and upheld KRA’s objection decision.
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