Lilian Nyiva
Court Rules on Tax Exemptions in Kenya-Japan Projects
Kenya's Supreme Court has dismissed a case challenging tax exemptions granted to Japanese companies and staff working on Kenya-Japan-funded projects, while also declaring Legal Notice No. 15 of 2021 unconstitutional.
The ruling means the legal instrument that provided the framework for the tax exemptions does not meet constitutional requirements.
Background of the Case
The matter centered on tax incentives extended to Japanese entities involved in projects financed through cooperation between the governments of Kenya and Japan. The petition questioned whether the exemptions complied with the Constitution and the principles governing taxation.
After hearing the matter, the Supreme Court dismissed the appeal but found Legal Notice No. 15 of 2021 unconstitutional.
Implications of the Judgment
The decision is expected to influence how future tax exemptions relating to international development agreements are implemented. It also reinforces the constitutional requirement that tax measures and exemptions must comply with Kenya's legal framework.
Government agencies involved in implementing Kenya-Japan-funded projects may now review the legal basis for similar tax arrangements in light of the ruling.
