Introduction
The 90-day tax refund rule under Section 47(3) of the Tax Procedures Act can have significant consequences where the Kenya Revenue Authority (KRA) fails to determine a taxpayer’s refund application within the statutory period. Diamond Trust Bank applied for a refund of Kshs. 417,095,386.08 in overpaid corporation tax. KRA did not decide the application within ninety days and rejected it more than two years after it had confirmed the refund in writing. The Tax Appeals Tribunal held that the refund was approved by operation of law on the ninetieth day and that KRA had no power to reject it afterwards. The rejection was set aside and KRA was directed to apply the refund under section 47(5) of the Tax Procedures Act.
What happened
The bank lodged its application on 5th of December 2022 and the ninety days under section 47(3) ran out on 5th March 2023. On 24th April 2023, KRA wrote that the claim arose from overpaid instalment taxes and had been approved and forwarded for further processing. However, the refund was never paid. In June 2025, KRA issued assessments against the bank for the years 2019 to 2023 and on 2nd July 2025 told it that the refund had been rejected because an assessment had been initiated. The bank appealed the decision to the Tax Appeal Tribunal.
What the Tribunal Decided and Why
1. The rejection email was an appealable decision
KRA argued that the email of 2nd July 2025 was not a formal rejection and that the appeal was premature. The Tribunal disagreed on the basis that the email said plainly that the refund had been rejected and gave a reason, so it was a refusal under section 49 and the bank could appeal within thirty days under section 47(13).
2. Ninety days of silence is an approval
Under section 47(3), an application that the Commissioner fails to determine within ninety days is deemed ascertained and approved. The ninety days expired on 5th March 2023, so the refund was approved on that date by operation of law. The Tribunal followed Commissioner of Domestic Taxes v Royal Floraholland Kenya Limited [2025] KEHC 10008 (KLR), where the High Court held that section 47(3) is mandatory in nature and that a failure by the Commissioner to issue a refund decision within the prescribed ninety (90) day period renders those refund applications deemed allowed by operation of law.It therefore follows that KRA’s letter of 24th April 2023 only confirmed what the statute had already done.
3.Section 47(5) is not a power to reject
KRA said section 47(5) allowed it to reject the refund once the assessments put the bank in a debit position. The Tribunal held that the subsection only sets the order in which an approved overpayment is applied and does not allow KRA to reverse an approval. The assessments also came more than two years later and were still under appeal in TAT E1418 of 2025 and as such, relying on them was premature enforcement.
4. Reapplying was no answer and interest was refused
KRA had advised the bank to reapply once the assessment dispute ended. The Tribunal called that advice procedurally misleading, because a corporation tax refund must be claimed within five years of payment and that period had already passed. The bank also asked for interest at one per cent per month. The Tribunal declined, since the decision appealed was a rejection of the refund and not a refusal to pay interest.
The Orders
The Tribunal allowed the appeal, set aside the rejection of 2nd July 2025 and directed KRA to apply the approved refund in accordance with section 47(5) within ninety days. The order is to apply the refund and not simply to pay it, so any tax actually owing is dealt with first and only the balance is refunded.
Key Take-Homes for Stakeholders
Taxpayers and finance teams with refund claims
Diarise the ninetieth day from the date you lodge a refund application. If KRA has not decided by then, the refund is approved by operation of law, so write to assert it and keep every letter on file.
Businesses facing assessments after a refund is approved
A new assessment does not cancel an approved refund. KRA may apply the refund against tax actually owing but it cannot reject it. Object to the assessment within time and if KRA says i-Tax rejected the refund automatically ask in writing for the provision of law the same is based on.
Advocates, tax agents and tax compliance teams
Plead deemed approval under section 47(3) first and confirm which sub-section of section 47 applied on the date of lodging. Where interest is claimed, obtain a decision of the Commissioner on it, since the Tribunal declined to award interest when no such decision was before it.
Disclaimer: This post is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in this article should be assumed without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact our Tax Law and Consulting Department; TaxLaw@wamaeallen.com
About the author
Caxstone specializes in civil, employment and labour disputes, constitutional law, family law and succession, and environment and land matters. He has amassed a wealth of knowledge and experience in litigation which is evident in the successes obtained for clients. He is an active member of the Employment and Labour Relations Court Bar-Bench committee.
