Burden of Proof in Tax Disputes: Why It Rests on Taxpayers

Written by Globis Mandela

TAX DISPUTES

Why It Rests on Taxpayers

When a tax dispute arises, many are often surprised to learn that it is the taxpayer, not the tax authority, who must prove their case.

Section 56 of the Tax Procedures Act, 2015 places the burden of proof squarely on the taxpayer in all tax proceedings, whether before the Kenya Revenue Authority (KRA), the Tax Appeals Tribunal, the High Court, or the Court of Appeal. The taxpayer must demonstrate that a tax decision issued by KRA is incorrect.

Similarly, Section 30 of the Tax Appeals Tribunal Act specifies that in any proceeding before the Tribunal, the appellant bears the responsibility of proving that an assessment is excessive, or that a tax decision should not have been made or should have been made differently.

AT FIRST GLANCE

This may seem to contradict the general legal principle that “he who alleges must prove.” After all, if KRA takes a position on a taxpayer’s liability, shouldn’t KRA have to justify it? Yet, in tax law, the opposite applies for several practical and legal reasons:

• The Self-Assessment System

Modern tax regimes, including Kenya’s, are founded on the principle of self-assessment. Taxpayers are responsible for determining and declaring their own tax liabilities. Since they have access to their income, expenses, and deductions, they are best placed to substantiate their filings. Consequently, the law requires taxpayers to maintain accurate records and supporting documentation and to prove the correctness of their returns when challenged.

• Presumption of Correctness of KRA Assessments

Under Section 56(1) of the Tax Procedures Act, an assessment issued by KRA is presumed to be correct unless the taxpayer proves otherwise. In practice, this means that if a taxpayer disputes an assessment, they must produce evidence showing why it is erroneous.

• “He Who Asserts Must Prove”

Claims for reliefs, deductions, or exemptions are not automatic rights, they are privileges granted by statute. A taxpayer seeking such benefits must substantiate their claim with credible evidence such as invoices, receipts, or contracts.

A Shifting Burden

That said, Kenyan courts have clarified that the burden of proof in tax disputes is not static; it shifts back and forth between the parties. The High Court has likened it to a pendulum: once KRA issues an assessment, the burden shifts to the taxpayer to disprove it by providing sufficient evidence. The pendulum then swings to KRA to evaluate that evidence. If KRA finds the documentation inadequate, irrelevant, or unreliable, the burden swings back to the taxpayer to provide further proof.

Ultimately, the taxpayer’s ability to discharge this burden depends on good record-keeping and timely documentation. The law rewards preparedness. Taxpayers who can clearly substantiate their positions stand on stronger ground in any dispute. 

ULTIMATELY

The taxpayer’s ability to discharge this burden depends on good record-keeping and timely documentation. The law rewards preparedness. Taxpayers who can clearly substantiate their positions stand on stronger ground in any dispute. 

For additional information or assistance in tax-related matters, please contact us at info@memaadvocatesllp.com.