Taxation Battle Between Hashi & KRA
Once upon a time, a Kenyan company called Hashi Energy Limited (HEL) had a lucrative business. They supplied food and fuel to United Nations Peacekeeping Missions in the Democratic Republic of Congo (DRC). For years, they operated from their Kenyan offices, managing contracts, processing payroll, and running operations remotely. But when the Kenya Revenue Authority (KRA) came knocking for an audit covering 2017 to 2022, everything changed.
KRA examined HEL’s corporate income tax, PAYE, VAT, and withholding tax. At the end of the audit, KRA handed HEL a staggering tax bill: KES 7,029,209,729. That’s over 7 billion shillings. HEL objected, but the Tax Appeals Tribunal (TAT) upheld KRA’s demand. Frustrated and now in liquidation, HEL took the fight to the High Court.
HEL’s main argument was simple: “Our income came from the DRC. We supplied goods there, our employees worked there, and the contracts were executed outside Kenya. So why should we pay Kenyan tax?” It sounded reasonable. But Justice Moses, in his ruling delivered on 19th February 2026, dismantled that argument piece by piece.
The judge pointed to Section 4(a) of Kenya’s Income Tax Act. That law says: if you are a Kenyan resident company, and you carry on a business partly inside and partly outside Kenya, the WHOLE of your profits is deemed to have accrued in Kenya. HEL managed everything from Kenya – the contracts, the payroll, the strategic decisions. That created a “taxable presence” or nexus. The DRC has no Double Taxation Agreement with Kenya, so there was no shield against double taxation. The income was taxable in Kenya. Period.
Next, HEL tried to argue that because it was in liquidation, it couldn’t produce all the documents needed to support its claimed deductions – things like interest, bank charges, and VAT reconciliations. Surely the court would show some mercy? No. Justice Moses cited Section 56(1) of the Tax Procedures Act, which places the burden of proof squarely on the taxpayer. “The Appellant’s liquidation, though an unfortunate circumstance, does not shift the statutory burden,” the judge ruled. In other words, even a dying company must keep its records in order.
Then came the PAYE question. HEL had employees based in the DRC, and it argued that since those employees worked outside Kenya, no PAYE was due. The court applied Section 5(1)(b) of the Income Tax Act, which deems income paid by a RESIDENT employer to ANY employee to have accrued in Kenya. HEL processed the payroll from Kenya. It didn’t matter where the employee physically stood. PAYE was due.
Finally, HEL tried to avoid withholding tax on over KES 3.4 billion in financing costs, including “profit share” payments under Shariah-compliant financing. HEL said those weren’t “interest.” The court disagreed, holding that Kenya’s tax law defines interest broadly to include any return paid in respect of a loan or credit, regardless of the name used. And since HEL failed to provide the actual financing agreements, the judge had no choice but to side with KRA.
In the end, the High Court dismissed all seven grounds of appeal. Hashi Energy lost. The KES 7 billion tax bill stood.
What does this mean for you and your business?
-If you’re a Kenyan resident company, managing foreign projects from Kenya, expect to pay Kenyan tax on that income – even if the work happens across the border.
- Liquidation is NOT an excuse for poor record-keeping. The law still demands proof.
- PAYE obligations follow the employer’s residency, not the employee’s location.
-Don’t rename financing payments to avoid withholding tax – the taxman looks at substance, not labels.