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Through analysis and comment on new law and judicial decisions of interest, they assist business executives to identify developments and trends in tax law and revenue practice that might impact their business.

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Tax Alert - Overpaid taxes may be offset against all tax liabilities regardless of tax head

The Tax Appeals Tribunal in its decision delivered on 10 July 2026 in Howard Humphreys (East Africa) Limited v Kenya Revenue Authority, TATC/E980/2025, affirmed that approved overpaid taxes may be offset against all existing and future tax liabilities, including PAYE.

The dispute arose after the National Treasury issued a circular directing that approved tax refunds would  only be offset against taxpayers’ own tax liabilities and not against Pay-As-You-Earn (PAYE) and other taxes that it considered to be agency taxes. Following the circular, KRA disabled the iTax functionality that had previously allowed taxpayers to apply approved tax credits against PAYE liabilities.

The Tribunal held that Section 47 of the Tax Procedures Act, 2015 does not restrict the offsetting of overpaid taxes to specific tax heads. It further found that administrative guidance from the National Treasury cannot override rights expressly granted under legislation. Consequently, taxpayers with approved tax credits may utilise them to offset outstanding and future tax liabilities across all tax heads, including PAYE.

The decision is particularly significant for taxpayers holding accumulated tax credits, including withholding tax credits, who have limited opportunities to utilise those credits against corporation tax liabilities. Such taxpayers may rely on this decision when engaging KRA on the utilisation of approved tax credits and advocating for the activation of the relevant iTax functionality.