Hemingways Watamu Limited v Commissioner of Domestic Taxes (KRA)
The bottom line
#Kenya's Court of Appeal refused to pause a tax judgment against Hemingways Watamu because KRA can simply refund the money if the hotel wins its appeal.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the intended appeal is arguable
- 2.Whether, if the orders sought are declined and the intended appeal ultimately succeeds, the success will be rendered nugatory
Key legal issues
#Arguability of the intended appeal on the investment deduction rate (150% vs 100%)
The dispute over whether Hemingways is entitled to a 150% investment deduction under Paragraph 24(1)(f) or 100% under Paragraph 24(1)(e) of the Second Schedule to the Income Tax Act renders the intended appeal arguable and not frivolous.
The court weighed the rival contentions: the applicant relied on the Tribunal's finding of a 150% deduction under Paragraph 24(1)(f), while KRA defended the High Court's finding of 100% under Paragraph 24(1)(e). The court found this a genuine point of contestation sufficient to satisfy the arguability limb of the Rule 5(2)(b) test, without expressing any view on its eventual merits.
Whether refusal of a stay would render the intended appeal nugatory
The nugatory limb failed: no enforcement had been instituted, and KRA's capacity to refund under Section 47 of the Tax Procedures Act meant any success on appeal would not be rendered hollow.
The applicant's deponent conceded no enforcement mechanisms had been instituted and gave unelaborated apprehensions of irreparable harm. The court held that monetary exposure alone does not establish nugatory-ness where the respondent can refund; KRA pointed to the elaborate statutory refund mechanism under Section 47 of the Tax Procedures Act, which the court found meritorious and securing.
Legal principles established
#- An applicant under Rule 5(2)(b) must demonstrate both that the intended appeal is arguable and that, if the orders are declined and the appeal succeeds, the success will be rendered nugatory.
- An arguable appeal need not be one that must succeed; it is one that ought to be fully argued before the Court.
- Whether an appeal will be rendered nugatory depends on whether what is sought to be stayed is reversible, or if not, whether damages will reasonably compensate the aggrieved party.
Court orders
#- 1.The applicant's application dated 16th December 2025 is dismissed
- 2.Costs of the application to the respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi (Commercial & Tax Division)
- HC. Tax Case No. E306 of 2024
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
Relief refused
#Stay of execution of the High Court judgment dated 7th October 2025 pending the intended appeal
Although the intended appeal was arguable, the applicant failed to demonstrate that its success would be rendered nugatory, given KRA's statutory refund mechanism
Stay of implementation of the judgment, including issuance of revised or additional tax assessments, claw-back of investment deductions, penalties or interest, and recovery or enforcement proceedings
Failed with the main stay application; no enforcement mechanisms had been instituted and KRA could refund under Section 47 of the Tax Procedures Act
Costs
Dismissed with costs to the respondent
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
Hemingways is required to demonstrate that its intended appeal is arguable and that if we decline the orders sought, and the intended appeal ultimately succeeds, it will be success in vain.
an arguable appeal is not one which must necessarily succeed, but one which ought to be fully argued before the Court
Whether an appeal will be rendered nugatory depends on whether what is sought to be stayed, if allowed to happen will be reversible, or if it is not, whether damages will reasonably compensate the aggrieved party.
Consequently, the applicant's application dated 16th December 2025 fails. It is hereby dismissed with costs to the respondent.
Issues in the judgment
#The High Court judge's name is rendered inconsistently within the ruling.
Pagination is internally inconsistent, repeating 'Page 1 of 6' through 'Page 9 of 6'.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Hemingways Watamu Limited v Commissioner of Domestic Taxes (KRA)", Case Analysis (2026). Civil Application No. E755 of 2025. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1733/eng@2026-09-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.