Home ECONOMY Companies set for Sh2.6bn boost from VAT claims

Companies set for Sh2.6bn boost from VAT claims

by biasharadigest
Market News

Companies set for Sh2.6bn boost from VAT claims

Times Tower
KRA headquarters at Times Tower in Nairobi. FILE PHOTO | NMG 

Businesses are set to get a major cash flow boost after the taxman moved to implement legal changes by the Treasury that will see at least Sh2.6 billion withholding VAT claims offset against their pending tax dues.

The Treasury, through the Statute Law (Miscellaneous Amendment) Bill 2019, successfully last year sought approval from Parliament to empower the Commissioner of Domestic Tax to allow withholding Value Added Tax (VAT) to be applied against any tax payable.”

The legal changes allowed taxpayers to apply any withheld VAT in their credit to offset any other liability due to the taxman.

Consequently, Kenya Revenue Authority (KRA) on Tuesday asked businesses seeking refunds of withholding VAT to apply online for VAT refunds due to withholding tax following automation of the refunds process.

“KRA informs the public that following amendments to section 17(5) of VAT Act 2013 that reintroduced refunds of VAT arising from excess credits out of VAT withheld by appointed tax withholding agents, the authority has automated the applicable refund process and rolled out a module in iTax system to process the refunds,” said KRA in a notice.


“In line with the amendment, a registered person who accumulated excess Withholding VAT credit within 36 months prior to July 23, 2019, may apply for offset or refund of the excess tax within 12 months from 23rd July 2019.”

Claims for refunds of the withholding input VAT, charged at the rate of six percent, have been accumulating since September, 2017, when the taxman switched to a new formula in processing refunds following the enforcement of VAT regulations which were gazetted in April, 2018.

Tax refund claims against the KRA have been a major point of complaint for many businesses, which say it denies them working capital.

“It means cash flows will improve because now you can get the money back or you can offset against taxes you would have otherwise paid,” said Nikhil Hira, tax expert and a director at Bowmans (Coulson Harney LLP) law firm.

The value of withholding VAT had crossed Sh2.68 billion by August 2018, the Kenya Association of Manufacturers claimed, a value which has since gone up.

Manufacturers protested to KRA on January 29 last year over lack of a legal framework to claim withholding VAT, compounding cash crunch challenges for some companies.

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