What happened

The Tax Appeals Tribunal in Nairobi has declared the Kenya Revenue Authority’s (KRA) tax assessment of Sh972 million against Kuscco, a leading construction and engineering company, to be faulty. The tribunal’s decision, handed down on 10 October 2026, means the assessment will be set aside pending a fresh review by KRA. The ruling follows a formal appeal lodged by Kuscco after the authority issued the assessment earlier this year, alleging under‑declared turnover and unpaid value‑added tax (VAT). The tribunal’s judgment cites procedural irregularities in how the assessment was calculated and served, indicating that KRA did not follow the statutory timelines prescribed under the Tax Procedures Act. As a result, Kuscco is no longer required to pay the disputed Sh972 million until the matter is re‑examined.

Context and background

Kuscco, formally known as Kuscco Construction Ltd, has been operating in Kenya’s infrastructure sector for over two decades, delivering projects ranging from road upgrades to large‑scale commercial complexes. The company’s tax profile has historically been scrutinised by KRA due to the high‑value contracts it secures with both government and private clients. Earlier in 2026, KRA issued a reassessment covering the 2022‑2024 financial periods, claiming that Kuscco had under‑reported income by roughly Sh3 billion and owed Sh972 million in additional taxes, penalties and interest. Kuscco’s management disputed the figures, arguing that the authority’s calculations ignored legitimate deductions for project‑related expenses and foreign‑exchange gains.

The appeal process began in June 2026 when Kuscco filed a notice of objection with the Tax Appeals Tribunal, seeking a review of the assessment’s legality. In its submission, Kuscco highlighted three main grievances: first, the lack of a detailed audit trail supporting KRA’s alleged under‑declaration; second, the failure to provide a proper notice period before levying the assessment; and third, the inclusion of penalties that the tribunal deemed disproportionate to the alleged tax shortfall. KRA, for its part, defended the assessment as a necessary corrective measure to ensure revenue collection from a sector that contributes significantly to the national GDP.

The tribunal’s decision reflects a broader pattern of heightened scrutiny over large tax assessments in Kenya. Over the past five years, the tribunal has reviewed more than 150 high‑value cases, overturning or modifying roughly 30 % of them due to procedural lapses or evidentiary gaps. The ruling against KRA’s Sh972 million assessment underscores the importance of strict compliance with the Tax Procedures Act and highlights the legal avenues available to taxpayers who believe they have been over‑charged.

Compared with what is normal

Large tax assessments of this magnitude are relatively rare in Kenya’s corporate tax landscape. Most commercial tax disputes involve amounts ranging from a few million shillings to low‑hundred‑million shillings, reflecting the typical size of taxable turnover for medium‑sized enterprises. A Sh972 million assessment places the Kuscco case among the top tier of contested tax liabilities, comparable only to a handful of disputes involving multinational mining and telecommunications firms in recent years.

  • Typical assessments for construction firms usually fall between Sh200 million and Sh500 million, based on audited turnover and standard VAT rates.
  • Tribunal overturns occur in about one‑third of cases where procedural errors are proven, reinforcing the need for meticulous documentation.
  • When an assessment is set aside, KRA often re‑issues a revised assessment that adheres to statutory timelines and includes a transparent breakdown of calculations.
Why it matters

The tribunal’s ruling has immediate practical implications for Kuscco and other Kenyan SMEs that may face similar large assessments. First, it signals that KRA’s enforcement actions are not absolute and can be challenged successfully if due process is not observed. This offers a degree of reassurance to businesses that diligent record‑keeping and timely objections can protect them from undue financial strain. Second, the decision may prompt KRA to revisit its assessment methodology, potentially leading to more transparent and consistent tax calculations across the board. For the broader economy, a fairer tax administration can improve compliance rates, as firms feel confident that disputes will be resolved on merit rather than administrative expediency. Finally, the financial impact of a Sh972 million liability—if it had stood—would have affected Kuscco’s cash flow, its ability to meet project deadlines, and its capacity to invest in new contracts, thereby influencing employment and supplier payments in the construction value chain.

Practical steps
  • Review all tax notices carefully and verify that KRA has complied with the notice‑period requirements stipulated in the Tax Procedures Act before making any payment.
  • Maintain detailed supporting documentation for all income, expenses, and foreign‑exchange transactions to defend against potential reassessments.
  • If you receive a large assessment, consider filing a formal objection within the statutory 30‑day window and seek professional advice to prepare a robust case.
  • Monitor tribunal rulings and KRA guidelines regularly, as they can provide precedents that may be relevant to your own tax position.

Beavoren Ventures’ Tax Planning & Compliance service can help you navigate complex tax assessments, ensure your filings meet statutory requirements, and represent you in tribunal proceedings if needed.

Talk to our team at Beavoren Ventures - info@beavorenventures.co.ke - to set up your systems correctly.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.