Clients seeking services at KRA headquarters, Times Tower, Nairobi.
A property firm has lost a Sh79 million tax battle against the Kenya Revenue Authority (KRA) after failing to produce records proving its ownership and loans during 2020 and 2021.
The Tax Appeals Tribunal upheld the KRA’s disallowance decision after finding the company, Fuse Holdings Limited, had not shown who owned the company during the period and whether loans from related companies were interest-free.
The Tribunal held that taxpayers challenging assessments must support their claims with evidence tied to the relevant years, rejecting Fuse Holdings Limited’s reliance on a 2025 annual return and unsupported assertions about its borrowings.
It said historical claims in tax disputes must be supported by contemporaneous records, finding that Fuse failed to prove its shareholders were not non-residents.
The dispute arose from a KRA verification of Fuse’s corporation tax, value added tax(VAT),pay-as-you-earn (PAYE) and withholding tax affairs. KRA assessed the company at Sh45.8 million on June 30, 2025.
The assessment comprised Sh41.4 million in corporation tax, Sh4.2 million in VAT and Sh155,464 in withholding tax.
The parties later reached a partial settlement, reducing VAT to Sh94,138 and withholding tax to Sh17,380. Corporation tax was revised to Sh26 million, including principal tax, penalties and interest.
Only the Sh79.7 million interest disallowance remained before the Tribunal. KRA had disallowed Sh40.3 million in interest claimed for 2020 and Sh39.4 million for 2021.
Fuse argued KRA had applied the wrong law by using the 30 per cent earnings-before-interest, tax, depreciation and amortization test introduced by the Finance Act 2021.
The company said the provision took effect on January 1, 2022, and could not apply to its 2020 and 2021 returns.
Fuse maintained that its interest-bearing loans came from I&M Bank, Guardian Bank and Diamond Trust Bank. It said advances from directors and related companies, including Filmico Agencies Limited, Halogen Holding Limited and Jasmine Holdings Limited, were interest-free.
KRA said Fuse’s borrowings from directors and related parties exceeded three times its capital. It put total borrowings at Sh499 million in 2020 and Sh500 million in 2021.
Times Tower in Nairobi, the headquarters of the Kenya Revenue Authority (KRA).
The Tribunal, however, found KRA had reproduced a version of the law that was not in force then. “A taxing provision does not operate retrospectively in the absence of clear words to that effect,” said the Tribunal.
It found KRA’s actual calculation used the older three-to-one debt-to-equity test applicable in 2020 and 2021.
The Tribunal found Fuse had produced only a 2025 annual return showing four Kenyan directors and two shareholders, each holding 45 ordinary shares.
That document could not establish ownership during the years under review. “A return describing the shareholding position in January 2025 is not evidence of the persons who held the shares in the company, or of their residence, in 2020 and 2021,” it said.
Fuse did not produce annual returns, a register of members, shareholder lists, audited financial statements or statements of changes in equity for the disputed years.
It also provided no loan agreements, board resolutions, ledger extracts or audited accounts to prove that related-party advances were interest-free.
“A bare assertion, however often repeated, is not evidence,” the Tribunal said.
The Tribunal found Fuse’s November 2021 bank facility summary incomplete and noted that it did not include Diamond Trust Bank.
Three times, Fuse’s capital amounted to no more than Sh23.5 million in 2020 and Sh25 million in 2021, against borrowings approaching Sh500 million.
It dismissed the appeal and upheld KRA’s decision to disallow the Sh79.7 million interest expense.
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