The Tax Appeals Tribunal has overturned a multimillion-shilling tax assessment against petroleum broker John Wainaina Kamau, ruling that the Kenya Revenue Authority (KRA) had erred in classifying oil marketer sales as his own and imposing corporate and value-added taxes based on inflated turnover assumptions.
- •The case stemmed from a KRA compliance check conducted at the Kenya Pipeline Company (KPC) depot in Nakuru, which flagged Kamau’s company for under-declaring sales between 2020 and 2022.
- •The authority relied on fuel movement data logged under Johnsmart Services Ltd, a reseller account associated with Kamau, to construct assessments issued through the iTax platform without prior explanation or engagement.
- •In a decisive ruling, the Tribunal held that Kamau operated solely as a middleman in the petroleum supply chain and was only liable to pay taxes on his commission earnings, not the full value of petroleum sold by oil marketing companies (OMCs) to independent petrol stations.
“The Tribunal notes that while the Appellant (John Kamau) held that as a mere middle-man earning a margin, it was wrong for the Respondent (KRA) to consider the entire OMCs sales to small petrol stations as belonging to the Appellant and proceeding to impose income tax and VAT,” the Tribunal, chaired by Christine Muga, ruled.
KRA contended that the broker had failed to provide sufficient supporting documentation to challenge the assessments, despite being granted extensions to submit evidence. The authority also maintained that it was justified in confirming the tax assessments for corporation tax and VAT for the years 2020 and 2021, relying on its statutory powers to amend assessments in the absence of adequate taxpayer documentation.
According to the Tribunal, the revenue authority mistakenly assumed that the total value of fuel drawn from KPC under the Johnsmart account reflected Kamau’s own sales, rather than those of the upstream oil marketers. Kamau had been reselling excess allocations from licensed OMCs at a margin to smaller stations, a common practice in the downstream fuel market.
The Tribunal also dismissed KRA’s decision to assign a 1% markup to Kamau’s sales volume, stating the authority had failed to provide a rational basis for the figure and had ignored evidence submitted by the taxpayer showing his actual margins. The panel found that KRA neither demonstrated how the 1% was derived nor considered expense deductions legally available to the taxpayer under income tax law.
“The Tribunal was not afforded cogent reasons why the Respondent would opt to charge tax without factoring in expenses incurred in production of that income,” the tribunal stated.
Recently, KRA launched the Electronic Tax Invoice Management System (eTIMS) Fuel Station System, targeting tax compliance in the petroleum industry by the end of June 2025. The new system integrates forecourt controllers, computerised sales systems, fuel management systems, and point-of-sale (POS) devices to transmit transactions at the pump in real time to the KRA.