The Kenya Revenue Authority (KRA) has secured a landmark ruling that allows it to tax all unexplained deposits in bank accounts unless taxpayers can prove the funds are not income. This follows a case against Kirin Pipes Ltd.
During the hearing of the case, the taxman successfully argued that Sh54 million in deposits should be treated as taxable income after the company failed to provide convincing proof that the funds were either loans or capital injections. The judgment, however, underscored that the burden of proof lies with taxpayers, not the KRA. This now means, without solid documentation, deposits will automatically be presumed to be income.
This ruling has birthed varied thoughts among tax experts who now argue that the ruling reinforces the need for strong record-keeping and clear financial trails. As a result, businesses and individuals must now ensure that any bank inflows are properly supported by agreements, board resolutions or other verifiable evidence.
The court stressed that substance outweighs labels, meaning that merely calling a deposit a “loan” or “capital injection” without concrete evidence will not protect it from taxation. This decision is expected to widen KRA’s enforcement scope, with taxpayers now required to demonstrate transparency and accuracy in handling funds or risk significant tax assessments
