The Tax Appeals Tribunal has ordered the Kenya Revenue Authority (KRA) to review a Sh972.9 million tax demand against the Kenya Union of Savings and Credit Cooperatives (Kuscco) after finding that the authority relied on unreliable financial statements.
In its ruling delivered on October 9, 2026, the tribunal overturned KRA’s decision to uphold the disputed assessment and directed the taxman to reconsider the case using corrected financial records.
The dispute covers corporation tax, withholding tax, value-added tax (VAT) and pay as you earn (PAYE) for the period between 2019 and 2022. However, the decision does not permanently cancel the tax demand or exempt Kuscco from paying any taxes found to be due.
Kuscco challenged the assessment after a forensic audit uncovered inconsistencies in its financial statements covering 2018 to 2022. The union told the tribunal that alleged mismanagement by its previous management team had affected its accounts, forcing it to reconstruct the records.
Kuscco also argued that it informed KRA about the problems and requested more time to complete the corrections. However, the authority declined the request and issued the Sh972.9 million assessment on November 29, 2024, four days after the union sought an extension.
The union subsequently objected to the assessment on December 24, 2024, but KRA upheld its decision on February 18, 2025, prompting Kuscco to appeal to the tribunal in April that year.
KRA maintained that it used the records available at the time and argued that Kuscco had failed to provide sufficient supporting documents. The authority cited gaps in records relating to marketing commissions, VAT claims, exempt income, withholding tax and expenses for a housing project in Kitengela.
The tribunal, however, found that the main issue was not whether Kuscco maintained financial records, but whether those records accurately reflected its transactions. The respondent was not justified in confirming the additional assessments on the basis of financial statements it had been informed were erroneous and unreliable.
The panel directed Kuscco to submit signed audited financial statements within 14 days of the judgment. KRA must then review the documents and issue a fresh decision within 60 days of receiving them.
Kuscco faces wider financial scrutiny following a forensic audit by PricewaterhouseCoopers (PwC). The audit identified Sh9.3 billion in misstated accounts, including understated costs and overstated income that made the union appear more profitable than it was.
The report also warned that Sh24.8 billion deposited by 247 savings and credit cooperatives was at risk, estimated Kuscco’s insolvency at Sh12.5 billion and identified Sh6.5 billion in unreported interdepartmental lending.