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Stationery maker Kartasi Products Ltd must pay corporation tax on KSh100.9 million it received from its insurer for stock lost in floods, the Tax Appeals Tribunal has ruled, while throwing out most of the rest of a KSh509 million tax bill from the Kenya Revenue Authority (KRA).
The judgment, delivered on 6 November 2026 in Appeal E370 of 2026, partially allowed the Kartasi Products appeal and ordered KRA to issue a revised objection decision within 60 days.
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Why KRA chased Kartasi Products
Kartasi Products makes paper products and office and school stationery from Enterprise Road in Nairobi’s Industrial Area. It bought the business and assets of Kartasi Industries Ltd in 2022.
KRA flagged the company after spotting gaps between sales in its income tax and VAT returns. In December 2025 it assessed principal taxes of KSh458,632,909, or KSh576,484,007 with penalties and interest. Its objection decision of 27 February 2026 confirmed KSh509,276,565, including corporation tax of KSh328.1 million, PAYE of KSh57.4 million and stamp duty of KSh9 million.
Flood insurance payout ruled taxable
It was not disputed that Kartasi Products was paid by its insurer in 2024 for inventory lost in floods. The insured stock included newsprint, woodfree paper, covers and finished stationery.
The tribunal said “the character of a compensation receipt follows the character of what it replaces”. Because the lost goods were trading stock, it held that the payout was a revenue receipt. It also noted that the company had already charged the KSh100.5 million cost of the lost stock against its income, so leaving the payout untaxed would let it keep “a deduction for a loss which the insurer has reimbursed”.
What Kartasi Products won
The tribunal set aside KRA’s disallowance of purchases of KSh379.2 million for 2022 and KSh560.9 million for 2023, and the full PAYE assessment of KSh57.4 million. Trade rebates paid to supermarkets of KSh19.8 million (2023) and KSh14.9 million (2024) were accepted, but unsupported year-end accruals were not.
It struck out the KSh9 million stamp duty dispute, saying appeals on stamp duty go to the High Court under the Stamp Duty Act. A KSh3.1 million withholding tax claim was sent back to KRA for recomputation.
On rebates, Kartasi Products told the tribunal that it sells mainly to supermarkets under Joint Business Plan Agreements, where a customer earns a rebate as a percentage of sales once it hits agreed targets. The tribunal accepted rebates backed by customer invoices but upheld KRA on year-end accruals of KSh6.4 million for 2023 and KSh10 million for 2024, which had no invoices behind them. It added that a rebate treated as a reduction of revenue cannot be deducted a second time as an expense.
When KRA recomputes the bill, tax of KSh5 million already paid for 2024 must be credited, and penalties and interest must be worked out again on the revised principal tax.
Businesses hit by floods can compare how flood claims are paid and read our guide to making an insurance claim. Other recent tax cases include Imperial’s KSh207m deduction fight and how to object to a KRA assessment.
Frequently asked questions
Is an insurance payout for lost stock taxable in Kenya?
In the Kartasi Products case, the tribunal held that compensation for lost trading stock is a revenue receipt and is taxable, because it replaces goods that would have been sold.
How much did KRA claim from Kartasi Products?
KRA’s objection decision confirmed KSh509,276,565 in taxes, penalties and interest.
What did Kartasi Products win?
The tribunal set aside purchases disallowances of about KSh940m, the KSh57.4m PAYE assessment and most trade rebate adjustments.
What happens next?
KRA must recompute the tax and issue a revised objection decision within 60 days of 6 November 2026.
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