Nyoro Construction Wins KSh211 Million Tax Fight After Tribunal Faults KRA

Nyoro Construction has defeated a KSh211.4 million tax demand after the Tax Appeals Tribunal found serious flaws in KRA’s assessment.

The construction company owned by businessman Josiah Njoroge Njuguna was established in 1983 and specialises in highways, civil works, and real estate.

The Tribunal ruled that parts of the assessment were issued too late, while other portions were undermined by KRA’s failure to properly consider the company’s evidence.

The judgement, delivered in Nairobi earlier this month, followed a dispute that began when the Commissioner of Domestic Taxes issued additional VAT and income-tax assessments on January 29, 2024.

The assessments totalled KSh211,433,282, covering tax matters dating from 2017 through 2021.

Nyoro objected, but KRA confirmed the assessments on April 1, 2025.

The construction company then took the dispute to the Tribunal, challenging both the legality and substance of KRA’s calculations.

Five-Year Limit

The first major blow came over the age of the assessments.

The Tribunal reaffirmed that KRA ordinarily has five years to amend a taxpayer’s self-assessment.

The law allows an extension where fraud, evasion, or wilful neglect is established.

But KRA could not simply allege such conduct. It had to produce evidence supporting those serious allegations.

The Tribunal found that it had failed to do so.

For VAT, the calculation was particularly damaging to KRA.

Because VAT is assessed monthly, the Tribunal found that KRA’s January 29, 2024, assessment could lawfully reach back only to December 2018.

The 2017 and 2018 VAT assessments were therefore time-barred.

The 2017 income-tax assessment was also outside the statutory window.

The Tribunal’s message was clear: allegations cannot substitute for evidence when KRA seeks to reopen old tax years.

Ignored Evidence

The surviving assessments then ran into another problem.

Nyoro produced invoices supporting its input VAT claims, including documents from Harmony, Gosteen, Dakimah, Super Deal and Colas East Africa.

KRA maintained that the relevant documents had not been provided. Yet the Tribunal found evidence showing that Nyoro had supplied them.

More importantly, KRA failed to respond adequately after being given an opportunity to address Nyoro’s supplementary evidence.

The Tribunal consequently found that Nyoro had discharged its initial burden of proof. The evidential burden then shifted back to KRA.

That principle became central to the judgement.

The Tribunal accepted that KRA can use alternative assessment methods when taxpayers fail to provide proper records.

However, that power cannot be used mechanically when relevant evidence exists.

Nyoro had also produced receipts supporting purchases used in its construction business.

The Tribunal found that KRA ignored those documents without providing a convincing explanation.

Its assessment method therefore could not stand.

755 Pages

The dispute over casual labour produced perhaps the clearest evidence of the company’s documentary trail.

Nyoro argued that road construction necessarily requires casual workers. KRA had nevertheless questioned the supporting records for their wages.

Nyoro responded with signed wage bills running from pages 420 to 1175. The bundle contained more than 755 pages documenting casual labour expenses.

The Tribunal acknowledged that the material was extensive.

But volume, it said, did not excuse KRA from considering evidence relevant to the tax dispute.

KRA had ignored the wage records without giving a plausible reason. The Tribunal therefore found that it had wrongly failed to consider Nyoro’s casual labour costs.

The same reasoning affected rental income.

Nyoro had already declared net rental income in its 2017 financial statements and paid tax on it.

KRA nevertheless captured the same income through its variance calculations and taxed it again.

The Tribunal found that this amounted to double taxation.

WIP Rejected

There was one important issue the Tribunal deliberately left unresolved.

Nyoro argued that construction Work-In-Progress should not attract VAT before certification, billing, or completion.

The Tribunal did not decide whether that argument was legally correct.

Instead, it found that Nyoro had introduced the WIP issue only during the appeal. It had not raised the matter in its original objection to KRA.

That meant the Tribunal could not properly determine it at the appeal stage.

The distinction matters.

The ruling does not establish that construction WIP is outside VAT. It simply says the Tribunal could not determine an issue that had not first been placed before KRA.

Ultimately, the Tribunal found Nyoro’s appeal meritorious.

It allowed the appeal and set aside KRA’s April 1, 2025, objection decision. Each side was ordered to bear its own costs.

READ ALSO: Maize Supplier Hit With KSh593 Million Tax Bill After Losing Fight With KRA

The wider lesson is significant for Kenya’s tax disputes.

KRA has broad powers to assess taxpayers and demand supporting records. But those powers remain constrained by statutory deadlines and evidential fairness.

Once a taxpayer produces credible evidence challenging an assessment, KRA must answer that evidence convincingly.

In Nyoro’s case, the Tribunal found that it did not.

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