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The Tax Procedures (Settlement of Tax Disputes Out of Court or Tribunal) Regulations

Legal Notice 123 of 2020

This is the latest version of this Legal Notice.
The Tax Procedures (Settlement of Tax Disputes Out of Court or Tribunal) Regulations
Citation
Legal Notice 123 of 2020
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Tax Procedures Act
Date
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English
Type
Legal Notice
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LAWS OF KENYA

TAX PROCEDURES ACT

THE TAX PROCEDURES (SETTLEMENT OF TAX DISPUTES OUT OF COURT OR TRIBUNAL) REGULATIONS

LEGAL NOTICE 123 OF 2020

  • Published in Kenya Gazette Vol. CXXII—No. 140 on 17 July 2020
  • Commenced on 17 July 2020
  1. [Revised by 24th Annual Supplement (Legal Notice 221 of 2023) on 31 December 2022]

1. Citation

These Regulations may be cited as the Tax Procedures (Settlement of Tax Disputes Out of Court or Tribunal) Regulations.

2. Interpretation

In these Regulations, unless the context otherwise requires—"appointed representative" means a person appointed in writing by a party in a tax dispute to represent that party to a tax dispute settlement process and whose appointment has been communicated to the facilitator and the other party;"Authority" means the Kenya Revenue Authority established under section 3 of the Kenya Revenue Authority Act (Cap. 469);"facilitator" means a person who mediates in a dispute settlement process between parties to a tax dispute;"parties in a tax dispute" means the Commissioner and a taxpayer with whom a tax dispute exists;"settlement agreement" means an agreement between parties in a tax dispute specifying the terms of settlement of the dispute which is witnessed by the facilitator;"tax dispute resolution consent" means a settlement agreement between parties to a tax dispute that is recorded in Court or Tribunal specifying the terms of the settlement agreement between the parties; and"Tribunal" means the Tax Appeals Tribunal established under the Tax Appeals Tribunal Act (Cap. 469A).

3. Settlement of tax disputes out of court or tribunal

(1)Where a tax dispute has been permitted to be settled out of court or tribunal in accordance to section 55 of the Act or section 28 of the Tax Appeals Tribunal Act (Cap. 469A) the settlement shall be done in accordance with these Regulations.
(2)A party to a tax dispute may apply to the court or tribunal to settle the tax dispute out of court or tribunal as the case may be.
(3)Where the parties to a tax dispute agree to settle the dispute out of court or tribunal—
(a)the agreement to settle the dispute out of court or tribunal shall be entered into voluntarily;
(b)the party seeking to settle the dispute out of court or tribunal shall obtain the consent of the other party before applying to the court or tribunal under paragraph (2); and
(c)the parties shall be committed to the settlement process.
(4)The parties to a tax dispute shall conclude the settlement process within ninety days from the date the court or tribunal grants permission to settle the dispute out of court or tribunal.
(5)A tax dispute shall be referred back to the court or tribunal where the parties fail to reach a settlement agreement within ninety days under paragraph (4).

4. Tax disputes that may be settled out of court or tribunal

A tax dispute shall not be settled out of court or tribunal if—
(a)the settlement of the dispute would be contrary to the Constitution, the tax law or any other written law;
(b)the tax dispute involves the interpretation of the law;
(c)there is evidence that the taxpayer has committed fraud in relation to tax; or
(d)the parties to the tax dispute have previously failed to settle the dispute out of court or tribunal.

5. Facilitators

(1)Where the court or tribunal has permitted the parties to a tax dispute to settle the dispute out of court or tribunal, a facilitator may be nominated, with the consent of the other party to the dispute—
(a)by the Commissioner from amongst the staff of the Authority; or
(b)by the taxpayer from a list of mediators accredited by an institution recognized in Kenya.
(2)The nomination of a facilitator under paragraph (1) shall be done within fourteen days after the court or tribunal has granted the parties to a tax dispute permission to settle the dispute out of court or tribunal.
(3)A facilitator nominated under paragraph (1)(a) shall not have been involved in any way in the matter which is the subject to the tax dispute.
(4)A facilitator nominated under paragraph (1)(b) shall not—
(a)be a practicing tax agent;
(b)represent or have represented the taxpayer in any matter; or
(c)have any interest in the tax dispute.
(5)The facilitator nominated under paragraph (1) shall be notified in writing of the nomination by the Commissioner.
(6)The facilitator shall, for the purposes of resolving the tax dispute—
(a)hold such number of meetings as may be appropriate;
(b)guide the parties to the tax dispute in the settlement of the dispute;
(c)promote and protect the integrity, confidentiality, fairness and efficiency of the process;
(d)act independently and avoid circumstances that may result in a conflict of interest; and
(e)employ procedures that shall lead to the expeditious resolution of the dispute.
(7)The facilitator shall disclose in writing to the parties to the tax dispute any conflict of interest which may arise before the commencement of the proceedings for the settlement of the tax dispute or which may arise during the proceedings.
(8)Upon the disclosure of a conflict of interest by a facilitator under paragraph (7), the facilitator shall immediately recuse himself or herself from dealing with the tax dispute and another facilitator shall be nominated in accordance with paragraph (1).
(9)A facilitator who has been nominated under paragraph (7) shall take over the settlement process from the point at which the previous facilitator had recused himself or herself.

6. Settlement process

(1)Subject to paragraph (1), the facilitator shall convene the first meeting between the parties to the tax dispute within fourteen days of being notified under regulation 5 (5) of his or her nomination, where the parties shall—
(a)identify the issues for settlement;
(b)agree on a schedule of meetings;
(c)decide on the service of documentary material relevant to the tax dispute;
(d)agree on the conduct of the meetings; and
(e)agree on any other issues necessary to facilitate the settlement of the tax dispute.
(2)Upon commencement of the settlement meetings, the parties to the tax dispute or the parties' appointed representatives shall not communicate with the facilitator in the absence of the other party and any communication with the facilitator shall only be in relation to the tax dispute.
(3)During meetings convened by the facilitator, the parties or their appointed representatives shall —
(a)maintain confidentiality and uphold decorum;
(b)uphold integrity and fairness;
(c)make full disclosure of material facts and documents relevant to the tax dispute; and
(d)strictly adhere to the agreed timelines.
(4)Where a party to a tax dispute is unable to meet any timelines agreed upon at a meeting convened by the facilitator, that party shall notify the facilitator and the other party in writing of the inability and specify the reasons for the inability.
(5)Where a party to a tax dispute or that party's appointed representative fails, without justifiable cause, to attend a meeting convened by the facilitator, the facilitator may appoint another date for the meeting or terminate the process in accordance with regulation 7 (1)(c).
(6)Where, in the course of resolving a tax dispute, a party requires an expert, that party may, with the consent of the other party—
(a)invite the expert to attend the meetings convened by the facilitator to provide expert testimony at the meeting; or
(b)provide the expert's testimony in writing.
(7)The parties may enter into a settlement agreement based on the evidence submitted during the meetings convened by the facilitator.

7. Termination of Proceedings

(1)Settlement proceedings may be terminated for the following reasons—
(a)where a party to the tax dispute opts to terminate the proceedings and notifies the other party, the court or tribunal in writing of the intention to terminate the proceedings;
(b)where both parties to the tax dispute mutually agree to terminate the proceedings and notify the court or tribunal in writing of the intention to terminate the proceedings;
(c)where a party fails to attend three consecutive meetings convened by the facilitator without any justifiable cause; or
(d)where the ninety days timeline required to resolve the dispute has lapsed and an extension of time by the court or the tribunal has not been granted.
(2)Upon the termination of settlement proceedings, the facilitator shall send a notice of termination in writing to the parties and the matter shall be referred back to the court or the tribunal.

8. Settlement agreements

(1)Where the parties to a tax dispute have settled the dispute out of court or tribunal, the parties shall set down in writing the settlement agreement.
(2)The settlement agreement shall specify—
(a)the background of the dispute and the issues in contention;
(b)the processes and specific exercises undertaken during the proceedings;
(c)the agreed issues and disputed issues;
(d)the taxes payable, where applicable, and justifications thereof; and
(e)the conditions of the settlement.
(3)The settlement agreement shall constitute the decision between the parties and shall—
(a)be dated and signed by the parties or their appointed representatives and witnessed by the facilitator;
(b)form the basis for preparation of tax a dispute resolution consent for filing before the court or tribunal, as the case may be;
(c)be binding to both parties;
(d)be a full and final settlement of the dispute save where the parties have expressly specified otherwise in the Agreement;
(e)be confidential and entered into on a "without prejudice" basis; and
(f)not be the basis for judicial precedent.
(4)Where the parties fail to reach a settlement agreement, the tax dispute shall be referred back to the court or tribunal, as the case may be, for determination.

9. Filing of settlement agreements

(1)Where a tax dispute is settled wholly or partially a consent agreement between the parties to a tax dispute setting down the terms of the settlement agreement shall be filed with the court or tribunal, as the case may be.
(2)A consent agreement between parties to a tax dispute shall be recorded by the court or tribunal as an order of the court or tribunal.

10. Enforcement of settlement agreements

Where a party to a tax dispute violates the terms of a settlement agreement between the parties, the other party may apply to the court or the tribunal for enforcement of the agreement.

11. Costs

(1)Each party shall bear its own costs for the settlement of the tax dispute out of court or the tribunal.
(2)Where a party invites an expert in accordance with regulation (6), that party shall bear the costs of such expert.
(3)Where a taxpayer has nominated a facilitator in accordance with regulation 5(1)(b), the taxpayer shall bear any cost that may be payable to the facilitator.
(4)The Commissioner shall provide a venue for the meetings and where the other party prefers a different venue, that party shall bear the costs of that different venue.

12. Savings and transitional provisions

Any process for the settlement of a tax dispute out of court or tribunal that commenced before the coming into force of these Regulations shall be dealt with in accordance with the framework under which the process commenced.
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History of this document

31 December 2022 this version
17 July 2020
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