Law - MGW Advocates LLP

Kenya’s Tax Appeals Victory Signals Robust Defense of Taxpayers’ Rights

On May 9, 2025, the Tax Appeals Tribunal in Nairobi delivered a landmark ruling in Diocese of Nyeri Trustees vs. Commissioner of Legal Services & Board Coordination (TAT Appeal No. E1147 of 2024), a case masterfully argued by MGW Advocates LLP. The Tribunal set aside a Kenya Revenue Authority (KRA) demand for Kshs. 8,600,551 in VAT liability, migrated from the Legacy system to iTax, covering August 2011 to December 2014. This victory not only vindicates the Diocese of Nyeri Trustees but also reinforces the constitutional and statutory protections for taxpayers against arbitrary tax demands. It underscores the critical role of legal advocacy in safeguarding fair administrative action and highlights the need for systemic reforms to prevent abuse in tax administration. The Case: A Battle Over Unlawful Tax Demands The Diocese of Nyeri Trustees, a church-based entity registered in 1959 with tax obligations since 1993, faced a KRA demand on June 25, 2024, for Kshs. 8,600,551 in alleged VAT arrears from August 2011 to December 2014. The demand stemmed from ledger balances migrated from KRA’s outdated Legacy system to the iTax platform. The Diocese, represented by MGW Advocates LLP, objected on July 16, 2024, arguing the demand was time-barred and procedurally flawed. KRA’s Objection Decision on September 13, 2024, upheld the demand, prompting an appeal to the Tribunal on October 11, 2024. MGW Advocates LLP built a compelling case, arguing that KRA’s demand violated the repealed VAT Act, 2013 and the Tax Procedures Act, 2015. They contended that the demand, issued over nine years after the relevant tax periods, exceeded the five-year statutory limit for amending assessments under Section 46(4) of the VAT Act and Section 31(4)(b) of the Tax Procedures Act. The firm further highlighted KRA’s failure to serve a notice of amendment, denying the Diocese its right to object under Section 50 of the VAT Act. The demand’s lack of specificity on tax periods and reliance on a Public Notice issued after the demand (July 31, 2024) violated fair administrative action under Article 47 of the Constitution and Section 4(3)(a) of the Fair Administrative Action Act. Tribunal’s Ruling: A Triumph for Legal Precision The Tribunal, in a unanimous decision on May 9, 2025, ruled in favor of the Diocese, setting aside KRA’s Objection Decision. The judgment addressed three key issues: The Tribunal allowed the appeal, set aside the KRA’s decision, and ordered each party to bear its own costs, delivering a resounding victory for the Diocese and taxpayers at large. Broader Implications: Protecting Taxpayers’ Rights This ruling, driven by MGW Advocates LLP’s meticulous legal strategy, has far-reaching implications for Kenya’s tax administration and judicial oversight: • Statutory Limits Upheld: The decision reinforces the five-year limit for tax assessments and record retention, protecting taxpayers from demands for outdated liabilities. It compels KRA to act promptly and within legal timelines, preventing the resurrection of stale claims.• Fair Administrative Action: By invoking Article 47 and the Fair Administrative Action Act, MGW Advocates LLP highlighted KRA’s procedural lapses, such as inadequate notice and retrospective application of the Public Notice. This sets a precedent for demanding transparency and fairness in tax administration.• Challenging Arbitrary Demands: The case exposes vulnerabilities in KRA’s system migration processes, particularly the Legacy-to-iTax transition. MGW Advocates LLP’s success underscores the need for taxpayers to challenge unclear or untimely demands, ensuring KRA adheres to statutory processes. The Role of Legal Advocacy MGW Advocates LLP’s triumph demonstrates the power of skilled legal representation in holding public institutions accountable. Their strategic use of statutory provisions, constitutional rights, and judicial precedents like Republic vs. KRA Ex-Parte Cooper K-Brand Limited (2016) and Export Trading Company vs. KRA (2019) exposed KRA’s procedural and legal errors. This case exemplifies how legal advocacy can protect vulnerable entities, like religious organizations, from bureaucratic overreach, ensuring justice and fairness. A Call for Reform The Tribunal’s ruling signals the need for systemic reforms: • KRA Process Improvements: KRA must ensure timely, specific, and statutorily compliant tax demands, with clear communication during system migrations. • Judicial Vigilance: Courts and tribunals should adopt fair administrative action principles to dismiss baseless claims swiftly, protecting public interest advocacy.• Legislative Action: Parliament must enact legislation that safeguard tax payers rights and further strengthen the taxpayer charter as currently captured by the KRA Act, which is weak and ineffectual. Conclusion The Diocese of Nyeri Trustees victory, secured by MGW Advocates LLP, is a beacon for taxpayers facing arbitrary tax demands and advocates challenging systemic wrongs. It reaffirms Kenya’s constitutional commitment to fair administrative action and the rule of law. As Kenya strives to be a democratic leader in Africa, its institutions must protect those who uphold transparency, whether through tax appeals or whistleblowing. The Attorney General, Parliament, and KRA must act swiftly to implement reforms, ensuring no taxpayer or truth-teller faces undue legal burdens. This ruling is not just a win for the Diocese but a clarion call for justice, accountability, and reform.

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Taxpayer Rights and Statutory Compliance

Law / Roy Mwamba

Ashok Shah’s High Court VAT Refund Ruling Reinforces Taxpayer Rights and Statutory Compliance On May 30, 2024, the High Court of Kenya in Nairobi delivered a landmark judgment in Commissioner of Domestic Taxes vs. Ashok Shah & Mital Shah T/A Smityss Trading (Income Tax Appeal No. E068 of 2023), upholding a Tax Appeals Tribunal decision secured through the exceptional legal advocacy of MGW Advocates LLP. The court dismissed the Kenya Revenue Authority’s (KRA) appeal against a Tribunal order directing KRA to process a Kshs. 51,838,841 VAT withholding refund for Smityss Trading, ruling that KRA’s objection decision was invalid due to its issuance beyond the statutory 60- day timeline under Section 51(11) of the Tax Procedures Act, 2015. This victory not only vindicates Smityss Trading but also underscores the centrality of statutory compliance and taxpayer rights in Kenya’s tax administration. It exposes systemic delays in KRA’s processes and serves as a clarion call for reforms to protect businesses from bureaucratic overreach and ensure timely justice. The Case: A Battle for VAT Refund Rights Smityss Trading, a partnership business, applied for a refund of Kshs. 51,838,841 in excess VAT withholding credits, critical working capital for its operations. Following a compliance check, KRA issued a report on June 30, 2020, rejecting the refund claim, alleging the credits stemmed from withholding tax on supplies to major customers, not zero-rated supplies. KRA issued credit adjustment vouchers totaling Kshs. 51,834,841 for tax offsets, which Smityss contested in an objection letter dated September 11, 2020. KRA’s objection decision, issued over a year later on September 22, 2021, upheld the rejection, prompting Smityss, represented by MGW Advocates LLP, to appeal to the Tax Appeals Tribunal. MGW Advocates LLP argued that KRA’s objection decision violated Section 51(11) of the Tax Procedures Act, which mandates a decision within 60 days, failing which the objection is deemed allowed by operation of law. They contended that KRA’s delay rendered the decision void, citing precedents like Republic vs. Commissioner of Domestic Taxes ex parte Fleur Investment Ltd (2020). The firm further asserted that Smityss’ refund application was valid under Section 47 of the Tax Procedures Act and that the credit adjustment vouchers were unusable, as the business had collapsed due to KRA’s failure to process the refund, crippling its working capital. The Tribunal, on January 20, 2023, agreed, ordering KRA to process the refund within 90 days. KRA appealed to the High Court, arguing the Tribunal erred in deeming the objection decision invalid, failed to consider KRA’s case on merit, and risked unjust enrichment, as the vouchers were allegedly utilized. MGW Advocates LLP, led by Mr. Kirui, robustly defended Smityss, emphasizing the mandatory nature of Section 51(11) and the irrelevance of KRA’s claims given the statutory lapse. High Court’s Ruling: A Triumph for Statutory Timelines The High Court, per Hon. Lady Justice A. Ong’injo, dismissed KRA’s appeal on May 30, 2024, upholding the Tribunal’s decision. The court focused on two issues: the validity of KRA’s objection decision and Smityss’ entitlement to the refund. On the first issue, the court found KRA’s decision, issued over a year after Smityss’ objection, was fatally late under Section 51(11), which deems objections allowed if no decision is made within 60 days. Citing Equity Group Holdings Ltd vs. Commissioner of Domestic Taxes (2021), the court held that the provision is mandatory, not a procedural technicality, and Article 159(2)(d) of the Constitution cannot override clear statutory mandates. Precedents like Republic vs. Commissioner of Customs Services Ex-Parte Unilever Kenya Ltd (2012) and Vivo Energy Kenya Ltd vs. Commissioner of Customs & Border Control (2020) reinforced this position, affirming that late decisions are void. Having found the objection decision invalid, the court declined to address the refund’s merits, deeming it an academic exercise. The Tribunal’s order to process the refund was upheld, with KRA ordered to bear the appeal’s costs, cementing a significant victory for Smityss and taxpayers at large. Broader Implications: Protecting Taxpayer Rights The Smityss ruling, driven by MGW Advocates LLP’s legal prowess, has far-reaching implications for Kenya’s tax administration and constitutional governance: • Statutory Compliance: The decision reinforces the mandatory nature of statutory timelines, compelling KRA to act within 60 days on objections. This protects taxpayers from delays that disrupt business operations, as seen in Smityss’ collapse due to withheld working capital.• Fair Administrative Action: By invoking Section 51(11) and Article 47 of the Constitution, MGW Advocates LLP highlighted KRA’s procedural lapses, setting a precedent for timely and transparent tax administration, aligned with the Fair Administrative Action Act, 2016.• Economic Stability: Delayed refunds cripple businesses, particularly SMEs reliant on working capital. The ruling ensures taxpayers can access rightful refunds promptly, supporting economic growth under Kenya’s Bottom-Up Economic Transformation Agenda 2022-2027. The Power of Legal Advocacy MGW Advocates LLP’s triumph in Smityss exemplifies the critical role of skilled legal representation in upholding taxpayer rights. Their strategic reliance on Section 51(11), bolstered by precedents like Eastleigh Mall Ltd vs. Commissioner of Investigations & Enforcement (2023), exposed KRA’s statutory violation. By articulating the devastating impact of KRA’s delay on Smityss’ business, the firm secured justice and set a benchmark for protecting businesses from bureaucratic delays. This case demonstrates how legal advocacy can drive systemic change, ensuring public institutions adhere to the rule of law. A Call for Reform The Smityss ruling signals the need for urgent reforms in Kenya’s tax administration: • Timely Processing: KRA must implement systems to ensure objection decisions are issued within 60 days, as mandated by Section 51(11), to prevent business disruptions.• Transparent Refund Processes: KRA should clarify refund eligibility criteria and engage taxpayers before issuing credit adjustmentvouchers, ensuring compliance with Article 47 and the Fair Administrative Action Act.• Capacity Building: KRA officers need training on statutory timelines and digital refund systems to avoid errors, as seen in the untimely issuance of Smityss’ objection decision. Conclusion The Smityss Trading victory, secured by MGW Advocates LLP, is a beacon for taxpayers facing delayed or arbitrary tax decisions and a testament to the power of legal advocacy in

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Centering Human Rights in Kenya’s Artificial Intelligence Regulation

Law / Roy Mwamba

Kenya stands at a crossroads in its journey to become Africa’s leading Artificial Intelligence (AI) hub, as outlined in the National Artificial Intelligence Strategy 2025-2030. This ambitious vision, launched by the Ministry of Information, Communications, and Technology on March 27, 2025, promises economic growth, social inclusion, and innovation across sectors like agriculture, healthcare, and education. However, the absence of a robust AI regulatory framework, coupled with Kenya’s troubling history of state surveillance and extrajudicial abuses, raises urgent concerns. Without prioritizing human rights and constitutional compliance over nebulous “national security” justifications, Kenya risks deploying AI as a tool for oppression, amplifying surveillance, and increasing extrajudicial threats. The government must act decisively to ensure AI governance upholds the Constitution of Kenya 2010, safeguards fundamental freedoms, and prevents state overreach. Kenya’s AI Ambitions and Regulatory Gaps Kenya’s AI strategy aims to position the country as a global leader in ethical and inclusive AI development, with objectives including a robust governance framework and enhanced AI adoption in critical sectors. The strategy, developed through stakeholder consultations from January 14–19, 2025, emphasizes collaboration among government, private sector, academia, and civil society. Yet, as noted by White & Case, Kenya currently lacks specific laws regulating AI, relying instead on existing legislation like the Data Protection Act, 2019, Computer Misuse and Cybercrimes Act, 2018, and Consumer Protection Act, 2012. These laws, while relevant, are insufficient to address AI’s unique challenges, such as algorithmic bias, automated decision-making, and surveillance risks. The Kenya Robotics and Artificial Intelligence Society Bill, 2023, proposed by the Robotics Society of Kenya, seeks to create a professional body to regulate AI and robotics. However, its restrictive licensing requirements and penalties for non-compliance (up to KES 1 million or two years’ imprisonment) have sparked concerns about stifling innovation and enabling state control, as highlighted by the International Commission of Jurists (ICJ) Kenya. Similarly, the Kenya Bureau of Standards’ Draft Information Technology Artificial Intelligence Code of Practice (April 2024) remains unfinalized, leaving a regulatory vacuum. Without clear, rights-centered legislation, AI deployment risks exacerbating existing abuses. The Shadow of State Surveillance and Extrajudicial Abuses Kenya’s history of state surveillance and human rights violations casts a long shadow over AI regulation. Privacy International has documented the National Intelligence Service’s (NIS) direct access to telecommunications networks, enabling warrantless interception of communications data. The Security Laws (Amendment) Act, 2014, eroded constitutional protections under Article 31 by expanding NIS powers to monitor communications and detain suspects without judicial oversight. Reports from Amnesty International and Human Rights Watch detail credible allegations of extrajudicial killings, forced disappearances, and torture by security forces, often justified as counterterrorism measures. In 2024 alone, the Missing Voices Coalition recorded 104 extrajudicial executions and dozens of abductions targeting critics of the #RejectFinanceBill2024 protests. The integration of AI into Kenya’s surveillance infrastructure amplifies these risks. The National Surveillance, Communication, and Control System (NSCCS), implemented with Safaricom in 2014, uses CCTV, facial recognition, and data analytics to monitor urban areas. International partnerships, including with Israeli intelligence firms, have bolstered this system, raising concerns about data sovereignty and privacy. A 2023 exposé by Nation Media Group revealed law enforcement’s use of mobile phone metadata for covert tracking, often without warrants. The deployment of AI tools like Lumirax AI, flagged by X users as a potential surveillance threat, could further entrench these practices, enabling real-time profiling, predictive policing, and suppression of dissent. Human Rights and Constitutional Imperatives The Constitution of Kenya 2010 provides a robust framework to counter these threats. Article 31 guarantees the right to privacy, while Article 47 ensures fair administrative action. The Data Protection Act, 2019, recognizes the right not to be subject to automated decision-making with significant legal effects, aligning with global standards like the EU AI Act. UNESCO’s Recommendation on the Ethics of Artificial Intelligence (2021), endorsed by Kenya, emphasizes human rights, transparency, and accountability in AI governance. ICJ Kenya underscores that AI regulation must prioritize these principles to prevent violations of dignity and fundamental freedoms. Unregulated AI deployment threatens constitutional protections in several ways: • Privacy Violations: AI-driven surveillance, such as facial recognition and predictive analytics, risks mass profiling and unwarranted intrusion, violating Article 31.• Due Process: Automated decision-making in policing or intelligence could bypass judicial oversight, undermining Articles 49 and 50.• Freedom of Expression and Assembly: AI tools targeting activists, as seen in 2024’s protest crackdowns, threaten Articles 33 and 37, stifling dissent.• Discrimination: Algorithmic bias, if unaddressed, could perpetuate ethnic or socio-economic profiling, contravening Article 27. National security justifications, often invoked to expand surveillance, must not override these rights. As Kenyan courts have ruled, security cannot trump fundamental freedoms (Republic vs. KRA Ex-Parte Cooper K-Brand Limited, 2016). The state’s failure to investigate abuses, as noted by the Independent Policing Oversight Authority (IPOA), underscores the need for AI regulation toenforce accountability, not enable impunity. A Rights-Centered Path Forward To ensure AI serves Kenyans without becoming a tool of oppression, the government must prioritize human rights and constitutional compliance in its regulatory framework. The following actions are critical: 1. Enact Comprehensive AI Legislation: Parliament should fast-track a standalone AI law, informed by public participation as mandated by the Kenya Public Policy Handbook 2020. This law must: o Prohibit warrantless AI-driven surveillance and mandate judicial oversight.o Enforce transparency in AI systems, requiring public disclosure of their use in security operations.o Address algorithmic bias through mandatory impact assessments, as recommended by UNESCO.o Align with the Data Protection Act to safeguard privacy and limit automated decision-making. 2. Strengthen Oversight Mechanisms: The Office of the Data Protection Commissioner should be empowered to regulate AI systems, with authority to audit state and private sector deployments. An independent AI ethics board, comprising civil society and technicalexperts, should monitor compliance. 3. Reform Surveillance Practices: The NIS and National Police Service must adhere to constitutional warrant requirements for surveillance, as stipulated in the Kenya Information and Communications Regulations, 2010. International partnerships, such as those with Israeli firms, should be scrutinized to protect data sovereignty. 4. Protect Dissent and Whistleblowers: AI regulation must safeguard freedoms

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A Victory for Fairness and the Rule of Law

Law / MGW Advocates

Kamindi Selfridges Supermarket Limited’s Tax Appeals Triumph On October 30, 2020, the Tax Appeals Tribunal in Nairobi delivered a resounding judgment in Kamindi Selfridges Supermarket Limited vs. Commissioner for Investigations and Enforcement (TAT Appeal No. 52 of 2017), a case brilliantly argued by MGW Advocates LLP. The Tribunal set aside a Kenya Revenue Authority (KRA) objection decision demanding Kshs. 153,485,437 in taxes, penalties, and interest, ruling that KRA’s additional assessment for the years 2005–2009 was unlawful, untimely, and procedurally flawed. This landmark victory for Kamindi Selfridges Supermarket Limited is more than a win for a single business—it is a powerful affirmation of taxpayer rights, constitutional protections, and the rule of law. It exposes deep-seated issues in KRA’s tax administration and serves as a clarion call for reforms to ensure fairness, transparency, and accountability in Kenya’s tax system. Kamindi Selfridges Supermarket Limited, a Kenyan company retailing consumer goods from foodstuffs to clothing, found itself ensnared in a protracted tax dispute that began with a KRA raid on its premises on February 9, 2011. During this raid, KRA carted away accounting documents for 2005–2010 without proper inventory, setting the stage for a decade-long ordeal. In 2012, KRA issued a tax demand for Kshs. 77,871,335, followed by a revised assessment in May 2013 for Kshs. 70,540,151, covering corporation tax, VAT, PAYE, withholding tax, and rental income. Kamindi cooperated, paying the principal tax of Kshs. 18,573,832 by September 2013 and requesting a waiver of penalties and interest. Yet, KRA’s responses were evasive, demanding further payments as a condition for considering the waiver, which it never addressed despite multiple follow-ups. The situation escalated in November 2016 when KRA issued an additional assessment of Kshs. 72,607,955 for 2005–2009, alleging overstated purchases. Kamindi objected, citing the assessment’s untimeliness and KRA’s failure to return seized documents. Shockingly, KRA’s objection decision in February 2017 not only upheld the assessment but inflated the demand to Kshs. 153,485,437, a move MGW Advocates LLP argued was illegal under the Tax Procedures Act, 2015. Representing Kamindi, the firm filed an appeal, contending that KRA’s actions violated statutory timelines, constitutional rights, and principles of fair administrative action. MGW Advocates LLP’s legal strategy was a masterclass in precision and principle. They argued that KRA’s additional assessment, issued seven to twelve years after the tax periods, contravened Section 31(4)(b)(i) of the Tax Procedures Act, which limits amendments to five years unless fraud, gross neglect, or evasion is proven—none of which KRA substantiated. The firm highlighted KRA’s failure to provide evidence or return seized documents, denying Kamindi its right to a fair defense under Article 50(2)(b) of the Constitution. Most critically, they challenged KRA’s objection decision for exceeding its mandate under Section 51(8), which restricts the Commissioner to allowing or disallowing an objection, not increasing the assessment. The Tribunal agreed, finding KRA’s actions unlawful, untimely, and contrary to the doctrine of legitimate expectation, as KRA had concluded its 2005–2010 investigation in 2013, only to reopen it without notice four years later. The Tribunal’s ruling on October 30, 2020, was a triumph for justice. It set aside KRA’s objection decision, affirming that the additional assessment lacked legal and factual basis. By invoking Articles 47 and 50 of the Constitution, the Fair Administrative Action Act, 2015, and precedents like Republic vs. Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited (2018), MGW Advocates LLP exposed KRA’s procedural overreach. The decision underscores the mandatory nature of statutory timelines, the right to expeditious administrative action, and the need for transparency in tax assessments. Kamindi’s victory is a beacon for businesses burdened by arbitrary demands, reinforcing that KRA cannot wield its powers unchecked. This ruling carries profound implications for Kenya’s tax landscape. It compels KRA to adhere to the five-year statutory limit for assessments, protecting taxpayers from demands for long-past periods. It also demands procedural fairness, ensuring taxpayers receive clear evidence and opportunities to respond, as mandated by Article 47. Economically, it safeguards businesses, particularly SMEs like Kamindi, from financial strain caused by prolonged disputes and accruing interest, aligning with Kenya’s Bottom-Up Economic Transformation Agenda 2022-2027. The case parallels other taxpayer victories, like Sintel Security Print Solutions (2025), where MGW Advocates LLP successfully challenged KRA’s customs valuation, and Ashok Shah & Mital Shah (2024), where untimely objection decisions were struck down, cementing a judicial trend toward accountability. MGW Advocates LLP’s triumph in Kamindi is a testament to the power of legal advocacy in holding public institutions accountable. Their meticulous arguments, grounded in statutory provisions, constitutional rights, and judicial precedents, dismantled KRA’s case, saving Kamindi from an unjust financial burden. This victory demands urgent reforms: KRA must adhere to statutory timelines, provide clear evidence for assessments, and engage taxpayers fairly. Parliament should enact the Whistleblower Protection Bill and AI legislation to prevent systemic abuses. As Kenya strives for economic justice, the Kamindi ruling, secured by MGW Advocates LLP, stands as a rallying cry for a tax system rooted in fairness, transparency, and the rule of law.

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Corporate Law System

Intellectual Property

Law / MGW Advocates

1. Understanding Intellectual Property (IP) Intellectual Property law is concerned with safeguarding the products of human creativity and innovation. It encompasses intangible assets such as inventions, artistic works, trademarks, and trade secrets. IP rights (IPRs) play a crucial role in promoting innovation, trade, and economic growth. 2. Key Aspects of Kenya’s Intellectual Property Landscape Here are some essential points related to IP in Kenya: 3. Intellectual Property Rights and Economic Development IP is no longer limited to physical assets like land; it now includes intangible assets like patents, copyrights, and trademarks. The protection of IP rights is essential for economic growth and creativity. Kenya recognizes this importance and prioritizes IP in its legal system. 4. The Right to Property and IP Article 40 of Kenya’s Constitution guarantees the right to property. While land used to be the primary means of production, intellectual property now plays a central role. The protection of IP rights ensures fair trading, creativity, and dissemination of knowledge. 5. Conclusion Kenya’s IP landscape reflects a balance between innovation, protection, and economic development. As the country continues to evolve, addressing enforcement challenges and promoting IP education will be critical. Try and Contact MGW Advocates today.

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