The taxpayer bought land in Kiambu on which some commercial buildings stood. VAT of Ksh.11,200,008.00 was charged which the buyer was quite reluctant to pay, nevertheless he paid on insistence by the seller hoping to get a refund. The bone of contention in the case was how the land was viewed. The charge was based on the fact that commercial premises were involved who’s letting or sale is not exempted from VAT. But how to deal with the land was now the issue. The plaintiff cited paragraph 8 of the First Schedule of the VAT act (VAT exemption) it states “supply by way of sale, renting, leasing, hiring, letting of land or residential premises”. Close scrutiny of this statement indicates that sale of land is exempted, sale of commercial properties is not exempted since its only residential premises mentioned. The buyer through his lawyers argued that what they bought was land, where there was no indication that there was VAT on sale of land, again commercial premises are not defined by law, and only residential premises are defined. The meaning of Commercial premises can only be extrapolated.
The case was nearly heading for stalemate, the courts acknowledged the ambiguity and ruled in favor of the taxpayer. In case of ambiguity in law, tax cases are ruled in favor of the tax payer, it was stated “It is trite law that, the Government of Kenya, through the defendant, cannot levy taxes on the citizenry except as may be expressly provided by a statute.”
This decision has far reaching implications owing to the fact that so many taxpayers have paid VAT on purchase of commercial premises and therefore would demand for refund.
For details of the case click the Link- http://kenyalaw.org/caselaw/cases/view/163642/