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High Court declines Sh180mn tax refund claim for 3 pharmaceutical companies

NAIROBI, Kenya, May 27 – The High Court has upheld the Kenya Revenue Authority’s decision to reject VAT refund claims by three pharmaceutical companies amounting to Sh180 million.

The pharmaceutical companies; Universal Corporation Limited, Elys Chemical Limited and Dawa Limited filed a Petition in the High Court seeking to declare a section of the Finance Act, 2015 unconstitutional for its retrospective provisions.

They claimed that the amendments brought through the Finance Act 2015 had infringed on their rights as it had zero-rated medicaments, which were previously exempt.

Consequently, upon commencement of the law, KRA declined the refund claims of the pharmaceutical companies on the ground that they ought to have lodged the claim within three (3) months from the date of commencement of the zero-rating.

The Petitioners moved to court to seek to declare the section unconstitutional for breach of their right to property and for retrospective obligations upon them.

According to KRA, the Court found that no new tax obligations were imposed by the zero-rating of medicaments. The Section conferred a benefit to taxpayers’, but Parliament restricted the manner the benefit could be enjoyed.

“Since it is the zero-rating that had conferred the benefit to taxpayers, which did not previously exist, there was no breach of the right to property and the companies were not entitled to the refunds having made the application for refund out of the prescribed time period,” the Authority said.

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