June 16, 2020 0 By David Gichuhi

According to VAT ACT of 2013 Section 12;

Time of supply of goods and services

  1. Subject to subsection (3), the time of supply, including a supply of imported services, shall be the earlier of;
  2. the date on which the goods are delivered or services performed;
  3. the date a certificate is issued by an architect, surveyor or any other person acting as a consultant in a supervisory capacity;
  4. the date on which the invoice for the supply is issued; or
  5. the date on which payment for the supply is received, in whole or in part.

Below case of Scania East Africa Ltd vs KRA went KRA way and our opinion sides with the TAT (Tax Appeals Tribunal) decision.


KRA audited Scania for the period between January 2014 and August 2016 and issued an assessment of KES 18.5m principal VAT and KES 0.9m interest on 30/06/2017.

Scania objected on 27/07/2017.

Scania conceded KES 0.8m principal VAT on restaurant services received.

Scania objected KES 0.5m principal VAT unsupported by invoices and KES 17.3m Principal VAT that KRA calculated on the basis of customer statements.

KRA amended the original assessment by KES 0.5m with respect to unsupported invoices. However KRA upheld the KES 17.3m VAT in the objection decision dated 31/08/2017

Scania appealed to Tax Appeal Tribunal on 12/10/2017.

In their submission, Scania stated that their sales policy stipulates that a customer pays deposit before a truck /bus is fabricated. Upon completion they issue an invoice to the client to settle the outstanding balance and the bus /truck is transferred to the client. Once the bus/truck is transferred to the client they remit VAT

Scania stated that KRA’s decision to rely on customer statements would amount to double taxation.

In response KRA argued that Scania had already admitted paying VAT late.

Section 2 of the VAT Act 2013 provides that the’ tax period’ for VAT is one calendar month

KRA quoted several deposits received by Scania where VAT was declared several months later.

The Tribunal analyzed the facts of the case.

The tribunal relied on Section 12 of VAT Act;

12. Time of supply of goods and services outlined above and Section 19 of the VAT Act

19. When tax is due (1) Tax shall be due and payable at the time of supply. (2) Notwithstanding the provision of subsection (1), a registered person may defer payment of tax due to a date not later than the twentieth day of the month succeeding that in which the tax became due.

The tribunal concluded that the payment of deposit was a tax point of which Scania failed to pay VAT on. Consequently, VAT was chargeable not on full invoice but on deposits when received. The noncompliance of the same attracted penalties in respect to deposits only but not on full invoice

The appeal partially succeeded

The tax assessment was upheld on 27/03/2020 subject to KRA varying it as below:

  • VAT to be charged on deposits when received and not the full invoice
  • Any penalties to be charged on when the deposit was received not full invoice