Tax investigation and dispute resolution specialist

Overview.

Facing a tax investigation can be stressful, disruptive and feels intrusive. But getting expert advice (junyan and associates) at the outset can make an enormous difference to the outcome.

A tax enquiry can happen to anyone at any time. Whether you are a sole trader, company, partnership, trustee, executor, charity or individual taxpayer, you could be subject to a random or targeted tax investigation.

In Kenya, the Kenya revenue Authority (KRA) has intensified its enforcement measures, targeting business and individuals suspected of tax evasion or under declaration of income. If you are facing such an investigation, having a tax investigation and dispute resolution specialist by your side can make all the difference.

Most of clients have no experiences of tax dispute so our priority as Junyan and associates is to give you practice advice that help you deal quickly and successfully with any eventuality and to support you closely throughout the process.

Our experts, some being former employees of KRA, use their experiences from their latest guidance and legislation to keep any investigation to a minimum disruption level to you and your business and will also advice clients wishing to review their affairs proactively and better manage their tax risk before a problem occurs.

The following article will highlight the overview and needs of a tax investigation and dispute resolution specialist.

What is a Tax Investigation?

A tax investigation is an in-depth review carried out by KRA to determine whether a taxpayer has deliberately concealed income, falsified records, or failed to comply with tax obligations. Unlike a routine tax audit, which is more of a compliance check, a tax investigation is initiated when KRA believes there is intentional wrongdoing. It focuses on suspected tax fraud, concealment of income, false invoicing, and other serious tax offences.

Triggers for a Tax Investigation.

KRA may launch an investigation if:

• A business consistently files nil or low returns despite visible growth.
• There are discrepancies between VAT returns and actual sales.
• A whistleblower provides information on tax evasion.
• The taxpayer has unexplained bank transactions or wealth.
• Past audits revealed non-compliance.

The Tax Investigation Process

1. Preliminary Review

2. Notice of Investigation

3. Evidence Collection

4. Findings Report

5. Tax Dispute or Resolution

6. Prosecution (if necessary)

1. Preliminary Review

– KRA gathers intelligence from tax filings, banks, suppliers, and third parties. The Preliminary Review is the first stage of a tax investigation. At this point, the Kenya Revenue Authority (KRA) does not directly contact the taxpayer but instead collects background information to determine whether there are grounds for a full investigation.

During this stage, KRA may:

• Analyze tax returns filed over several years to identify inconsistencies or unusual patterns.
• Compare VAT declarations with data from suppliers, customers, and third-party systems such as iTax and customs records.
• Review bank statements and financial transactions (where accessible through legal requests) to detect unexplained income.
• Examine industry benchmarks to see if reported profits are in line with expected margins.
• Act on whistleblower reports or intelligence from informants.

Why the Preliminary Review Matters?

The outcome of the preliminary review determines whether:

• The case is dropped if no irregularities are found.
• The taxpayer is flagged for a compliance check or audit.
• A full-scale tax investigation is launched.

At this stage, the taxpayer may not even be aware that KRA is reviewing their profile. However, once anomalies are confirmed, KRA proceeds to issue a Notice of tax investigation.

• 2. Notice of Investigation

– The taxpayer is formally notified and asked to provide documents. Once the Preliminary Review reveals potential tax irregularities, the Kenya Revenue Authority (KRA) issues a Notice of tax investigation to the taxpayer. This formal communication marks the beginning of direct engagement between KRA and the taxpayer.

The notice typically includes:

• The period under tax investigation (e.g., specific financial years).
• The type of tax in question (VAT, PAYE, Corporate Tax, Excise, etc.).
• A request for documents and records, such as invoices, contracts, financial statements, and bank records.
• A timeline within which the taxpayer must respond.

Upon receiving the notice, the taxpayer is required to:

• Acknowledge receipt of the notice.
• Provide requested records within the stated timeframe.
• Cooperate fully with KRA officers during the investigation.

Failure to comply can result in:

• Penalties and interest on unpaid taxes.
• Freezing of bank accounts or seizure of assets.
• Escalation to the Office of the Director of Public Prosecutions (ODPP) for criminal charges.

Why Professional Help is Critical

At this stage, engaging a Tax Investigation and Dispute Resolution Specialist is essential. A specialist will:

• Review the notice to ensure KRA is acting within the law.
• Help prepare and present the required documents correctly.
• Advise you on what information to disclose — and what not to.
• Open channels for negotiation or settlement to avoid harsher outcomes.

• 3. Evidence Collection

– KRA may seize records, summon directors, and conduct forensic accounting. After issuing a Notice of Investigation, the Kenya Revenue Authority (KRA) moves into the Evidence Collection stage. This is where KRA actively gathers documents, data, and testimonies to support its case. The process is often intensive and can extend over several months.

How KRA Collects Evidence

• Document Review: KRA examines financial statements, sales records, purchase invoices, payroll records, contracts, and bank transactions.
• Third-Party Verification: Cross-checking information with suppliers, customers, and financial institutions.
• Site Visits: Inspecting business premises to confirm actual operations against declared income.
• Forensic Accounting: Using advanced techniques to trace undeclared income, hidden assets, or false invoicing.
• Summons and Interviews: Directors, accountants, and other key personnel may be summoned for questioning.

During this stage, the taxpayer is legally required to:

• Provide requested documents promptly and accurately.
• Attend interviews if summoned.
• Facilitate access to business premises and systems where necessary.

Non-compliance may result in:

• Heavy penalties under the Tax Procedures Act.
• Possible seizure of assets or bank account freezes.
• Escalation to criminal prosecution if fraud is detected.

A Tax Investigation and Dispute Resolution Specialist helps you by:

• Ensuring documents are well-prepared and consistent.
• Advising on how to handle KRA interviews and summons.
• Identifying possible weaknesses in KRA’s claims.
• Exploring opportunities for Alternative Dispute Resolution (ADR) before matters escalate.

• 4. Findings Report

– If fraud is proven, penalties and assessments are issued. Once the Evidence Collection stage is complete, the Kenya Revenue Authority (KRA) compiles its observations into a Findings Report. This document outlines the results of the investigation and serves as the basis for further enforcement or dispute resolution

The report typically highlights:

• Discrepancies identified in income declarations, VAT filings, or other tax returns.
• Unexplained transactions or assets uncovered during the investigation.
• Adjustments made by KRA, showing the additional tax liability.
• Penalties and interest imposed under the Tax Procedures Act.
• A demand notice specifying how much the taxpayer owes and the deadline for settlement.

Taxpayer’s Options after Receiving the Report. At this stage, the taxpayer can:

1. Accept and Settle – Pay the tax, penalties, and interest as demanded.
2. Dispute the Findings – If you believe KRA’s conclusions are inaccurate, you may file an objection within 30 days of the report.
3. Engage in Alternative Dispute Resolution (ADR) – Negotiate with KRA to reach a fair settlement.
4. Escalate to the Tax Appeals Tribunal (TAT) – If no agreement is reached, the taxpayer may appeal formally.

The Findings Report is often highly technical and may include assumptions or errors that inflate tax liability. A Tax Investigation and Dispute Resolution Specialist can:

• Review the report line by line to identify inaccuracies.
• Prepare a strong objection backed with evidence.
• Negotiate reductions in penalties and interest.
• Represent you in ADR or TAT hearings if needed.

• 5.Prosecution

 – In severe cases, KRA refers the matter to the Office of the Director of Public Prosecutions (ODPP). If the Findings Report reveals evidence of deliberate tax evasion, fraud, or criminal activity, the Kenya Revenue Authority (KRA) may escalate the matter to prosecution. At this point, the investigation moves beyond tax compliance into the realm of criminal law.

When Prosecution Happens, KRA refers a case for prosecution if:

• There is evidence of fraud, such as falsified invoices, undeclared income, or fictitious expenses.
• A taxpayer ignores notices and demands, refusing to cooperate.
• There is deliberate concealment of assets or income.
• The amounts involved are substantial, making the case a priority for deterrence.

The Legal Process

1. Case Referral: KRA submits the investigation file to the Office of the Director of Public Prosecutions (ODPP).
2. Charges Filed: If the ODPP is satisfied with the evidence, formal charges are filed in court.
3. Court Proceedings: The taxpayer is arraigned in court and faces trial.
4. Judgment: If found guilty, the penalties may include:
   • A fine of up to 200% of the tax evaded.
   • Seizure of assets to recover the taxes.
   • Imprisonment, depending on the severity of the offence.

Alternatives to Prosecution

Not all cases end up in court. A taxpayer may avoid prosecution by:

• Settling outstanding taxes and penalties before the case is referred.
• Engaging in Alternative Dispute Resolution (ADR) to reach an agreement with KRA.
• Filing an appeal with the Tax Appeals Tribunal (TAT) or higher courts if there are grounds to contest the findings.

Why Professional Representation Matters

Facing prosecution without expert support can cripple a business. A Tax Investigation and Dispute Resolution Specialist will:

• Engage with KRA before referral to court to negotiate a settlement.
• Defend the taxpayer in ADR or at the Tribunal.
• Work alongside legal advocates to mount a strong defense if the matter proceeds to trial.

Tax Disputes within Tax Investigation in Kenya

When the Kenya Revenue Authority (KRA) conducts a tax investigation, it often uncovers discrepancies between what the taxpayer declared and what KRA believes is the true tax liability. This difference in interpretation or assessment gives rise to a tax dispute.

A tax dispute may occur during or after an investigation if:

• KRA’s Findings Report imposes additional taxes, penalties, or interest that the taxpayer disagrees with.
• The taxpayer believes KRA has misinterpreted tax laws.
• KRA relies on inaccurate third-party information that doesn’t reflect the taxpayer’s true financial position.
• There are clerical or computational errors in KRA’s assessments.

Dispute Resolution Mechanisms

Tax disputes within an investigation can be resolved through several avenues:

Objection to KRA’s Findings

The taxpayer may file a Notice of Objection within 30 days of receiving the findings. Supporting documents and explanations must be submitted to challenge the assessment.

Alternative Dispute Resolution (ADR)

ADR provides a collaborative platform to resolve disputes without litigation. It allows the taxpayer and KRA to negotiate on issues such as tax liability, penalties, and interest.ADR is often quicker, less costly, and less damaging to a business’s reputation.

Tax Appeals Tribunal (TAT)

If ADR fails, the taxpayer can escalate the matter to the Tribunal for a formal hearing. The Tribunal reviews evidence from both sides and makes a binding decision.

Judicial Process

In cases of unresolved disputes, further escalation to the High Court and Court of Appeal is possible.

Why a Specialist is Essential

A Tax Investigation and Dispute Resolution Specialist plays a vital role by:

• Reviewing KRA’s findings for legal and technical accuracy.
• Preparing strong objections backed by evidence.
• Representing the taxpayer in ADR sessions and Tribunal hearings.
• Negotiating reduced penalties and settlements.
• Ensuring compliance while protecting the taxpayer’s rights.

Junyan & Associates: Your Partner in Tax Disputes.

At Junyan & Associates, we combine our expertise in tax investigation with proven skills in dispute resolution. Whether you are under investigation or already in dispute with KRA, we help you:

• Challenge unfair tax assessments.
• Explore ADR to resolve disputes amicably.
• Defend your case at the Tribunal or in court if necessary.
• Safeguard your business reputation and continuity.
•  Advice on relevant tax issues.

Our Approach

1. Protect – Transaction and documentation review tax reporting 

-Evaluating transactions ‘from the revenue authority’s perspective’ and providing assistance in working through the relevant processes to obtain technical rulings, opinions, and case laws in advance of your transactions.

-Preparing documentation and files to support tax positions in anticipation of future tax authority requests for information.

-Navigating voluntary disclosure, advance compliance and other tax authority programs.

2.  Manage – Tax audits and queries

-Responding to tax authority demands for information or documentation.

-Negotiating audits, responses to audit queries and, where regulations permit, judicial appeals.

-Engaging with the tax authority to agree on a project-based approach to progressing issues collaboratively.

-Working with senior officials to help ensure stated administrative policies and procedures are followed.

3.  Resolve – Tax dispute and controversy process

-Making informed decisions on preferred options for resolving difficult disputes (e.g. alternative forms of dispute resolution and/or litigation).

-Finalizing settlements and ensuring appropriate documentation is maintained.

-Managing the tax dispute resolution process in a no confrontational and effective manner.

-Using all available procedures and processes to help bring closure to your disputes, effectively and efficiently.

Conclusion

Tax authorities worldwide are under pressure to generate revenue, causing a rise in tax audit activity across all types of tax. Particular uncertainty can arise as businesses seek to access new and developing markets where the local tax environments may be unfamiliar and unpredictable.

The pressure on tax authorities is resulting in more investigations, larger adjustments and increased potential for penalties and interest. Wherever companies do business, they need to approach tax matters proactively and be ready to respond when a tax investigation begins. In addition, as revenue authorities seek to achieve their local goals, collaboration with other revenue authorities has become more visible and focused, leading to additional challenges in managing disputes across a number of jurisdictions.

Our specialists, including many former revenue authority officials, accountants, are experienced in all stages of the tax dispute continuum and tax investigation. Our approach is designed to help organizations address tax disputes through effective strategies for their mitigation, management and prompt resolution. 

Whether you are under review, in the middle of an investigation, or challenging an unfair tax assessment, we provide the expertise, representation, and negotiation skills you need to achieve a favorable outcome.

👉 Partner with Junyan & Associates today and let us turn tax challenges into opportunities for stability, growth, and peace of mind.

📞 Contact us now to schedule a consultation and take the stress out of tax compliance.