You have just received a tax assessment from the Kenya Revenue Authority (KRA), and the figures do not make sense. You have lodged an objection, but the disagreement persists. The thought of hiring expensive lawyers and spending years fighting KRA at the Tax Appeals Tribunal (TAT) or the High Court makes your stomach churn.
Fortunately, there is a better way. It is called Alternative Dispute Resolution (ADR).
Instead of treating tax disagreements like a bitter legal war, KRA’s ADR framework allows you and the taxman to sit at a roundtable, lay out your papers, and find a middle ground. Let us explore how the ADR process works in Kenya, why it is a game-changer, and how you can use it to resolve your tax headaches.
What Exactly is ADR?
Historically, tax disputes were strictly adversarial. It was the taxpayer versus KRA in a courtroom. ADR flips this script. It is a voluntary, structured mediation process where taxpayers and KRA officers meet in a non-adversarial environment.
The sessions are led by an independent KRA facilitator whose job is not to take sides but to help both parties examine the facts objectively and reach an amicable agreement.
Why Choose ADR Over Court Battles?
If you are on the fence about whether to battle KRA in court or opt for a sit-down, here are three reasons why ADR is usually the smarter way out:
a. Speed
By law, the ADR process must be concluded within 90 days from the date the dispute is referred to mediation. Court cases, on the other hand, can drag on for years, keeping your business in limbo.
b. Saves Money
You do not need to pay hefty legal fees to keep a lawyer on retainer for years. While you can bring a tax advisor to help you present your case, the process itself is free.
c. Peace of Mind
Courtrooms are stressful. ADR is conversational. It allows you to explain your business reality directly to human beings who can make practical adjustments based on the evidence you present.
How to Navigate the ADR Process
ADR is a process that involves various steps. Entering the ADR process is straightforward, but you must follow a specific legal sequence to ensure your application is valid.
Step 1: Trigger the Dispute First
You cannot just walk into a KRA office and ask for ADR. You must first have an active dispute. This means KRA must have issued a tax assessment, and you must have formally objected to it on iTax within 30 days.
Alternatively, you must have an active appeal pending before the Tax Appeals Tribunal (TAT). Then you ask to go for ADR.
Step 2: Apply for ADR
Once you have an active objection or tribunal appeal, either you or KRA can request that the matter be referred to ADR. You do this by submitting an application through the iTax portal or by writing formally to the Commissioner of Legal Services. Note: This may change.
Step 3: The Vetting Phase
KRA will review your application to check whether the dispute is suitable for mediation.
It is important to note that disputes involving tax evasion, fraud, or cases where a taxpayer refuses to provide basic accounting records are generally rejected for ADR. If your dispute is a genuine disagreement over system errors, deductions, or interpretations of law, it will be accepted.
Step 4: The Roundtable Sessions
Once your issue is accepted for ADR, you, your tax representative (if you have one), and the KRA team will meet for mediation sessions. This is your moment to shine. You will present your mitigating document with evidence such as eTIMS receipts, bank statements, and ledger reconciliations.
The atmosphere is professional yet conversational, aimed at finding where the numbers or interpretations diverged.
Step 5: Signing the Agreement
If you reach an agreement, both parties sign an ADR Agreement. This document outlines exactly how much tax is owed, any agreed-upon waivers of penalties or interest, and payment timelines.
If the dispute was already at the Tribunal, this signed agreement is registered with the TAT to officially close the case.
What Happens if You Cannot Agree?
Not all ADR sessions end in a handshake. If the 90 days lapse and both parties still cannot agree on a figure, the mediation is declared a ‘no agreement’. Do not worry.
You do not lose your rights. If ADR fails, the dispute simply goes back to where it left off, whether that was the KRA objection stage or the TAT. You can still fight your case through the traditional legal channels.
The Golden Key to ADR Success: Documentation
The biggest mistake taxpayers make is entering ADR with empty hands and emotional arguments. Saying ‘My business is struggling’ will not convince KRA to lower your assessment. Bring proof.
If KRA claims you owe VAT, bring your bank statements and eTIMS-compliant invoices to show the actual sales. If you are claiming deductions, bring the receipts. In the ADR room, clean paperwork is your absolute superpower.
Read Other Articles
a. How to Handle Tax Disputes with KRA – HERE
b. How Tax Disputes Arise – HERE
Read this e-Guide on How To Handle Tax Disputes (8 Steps) – HERE
