Tribunal orders KRA to review Sh1.8b Transmara Sugar tax query
Rift Valley
By
Joackim Bwana
| Apr 01, 2026
Tribunal orders KRA to review Transmara Sugar Company’s Sh1.8b tax claim. [File, Standard]
The Tax Tribunal has instructed the Kenya Revenue Authority (KRA) to review Transmara Sugar Company’s Sh1.8 billion tax deficit that it seeks to carry forward.
The Commissioner of Domestic Taxes told Transmara Sugar Company that they could not carry forward losses from 2011 and 2012 that had not been utilised, amounting to a tax deficit of Sh1,840,023,570.
The Tribunal judges, led by Justice Christine Muga, Dr Timothy Vikiru, Bernadette Gitari, Dominic Rono, and Billy Mijungu, gave KRA 60 days to review the said tax deficit.
It noted that the sugar company's initial losses were Sh6,442,015,483, and following various correspondence and meetings among the parties, the allowable losses were reduced to Sh1,840,023,570.
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The judges also overturned KRA’s decision permitting the sugar company to carry forward a tax deficit of Sh774,809,156, stating that this decision was based on a misinterpretation of data presented by the Kenya Sugar Board.
“The decision for disallowing carry forward of losses was premised on conclusions drawn from the Respondent’s (KRA) data analysis, which was premised on misapplication and misinterpretation of data from the Appellant (Transmara Sugar) and the Kenya Sugar Board. Such a misinformed decision cannot be justified,” stated Justice Muga.
The sugar company argued that KRA erroneously applied Sh74,278 per tonne as the average sugar price instead of the actual average price of Sh64,904 per tonne.
Transmara Sugar claimed that by using figures not reflected in taxable income, KRA distorted the company’s true tax position. In a letter dated 24 July 2019, the sugar company stated that the extension of the tax deficit was beyond the allowed 10 years under section 15(5) of the Income Tax Act Cap 470, which has since been repealed.
However, KRA, in its decision dated 26 November 2021, indicated that only unexpired losses as of 1 July 2021 would be subject to the new law.
On 29 September 2022, the tax authority announced that the Cabinet Secretary had approved an extension period to carry forward unutilised losses of Sh774,809,156 for the 2011 financial year.
Transmara accused KRA of denying them the right to benefit from the investment deduction incentive provided by law to encourage and reward investment in Kenya.
The company argued that KRA’s decision was unjustified, asserting that it had complied with all conditions outlined under Section 15(5) (repealed) of the ITA. Furthermore, they alleged that KRA relied on erroneous tax periods and budgeted sugar production figures rather than actual production figures to arrive at its conclusion.
They also claimed that KRA relied on extraneous reasons provided by the Kenya Sugar Board without engaging the appellant, which they said was contrary to the principles of natural justice and Articles 47 and 50 of the Constitution.
The sugar manufacturers noted that they submitted their application on 24 July 2019 and received a response only three years later, on 29 September 2022, which they considered unreasonable and prejudicial. They further accused KRA of relying on incorrect tax periods, bagged sugar, and estimated budget figures to reach its erroneous decision.
Conversely, KRA stated that Transmara Sugar had failed to provide evidence supporting the losses and its inability to recover them within the 10 years starting in 2011.
KRA explained that it conducted a data analysis of the company's production and sales from 2011 to 2021 before issuing the review, during which it recommended to the CS Treasury the approval of Sh774,809,156.
KRA added that it established the loss arose from capital deductions linked to substantial investments in plant and machinery, amounting to Sh1,840,023,570.