• National Treasury is expected to payout Sh14.4 billion in VAT refunds to traders and manufactures this year
• Businesses and traders have complained of delays in payment of refunds required as working capital hence constraining their cash flows.
Several companies are still waiting for tax refunds running into billions of shillings from Kenya Revenue Authority to resolve their expenses.
Among them, Stanlib Fahari Real Estate Investment Trust (REIT) whose acting chief executive Nozipho Makhoba said is anticipating the payouts to exempt fund’s owned subsidiaries from income tax.
Speaking at the investor briefing on Friday, Makhoba said the delayed refunds contributed to the fall in distributable reserves by Sh14.5 million in the year ended December 31, 2018.
This includes Sh13 million and Sh1.5 million withholding taxes on Greenspan Mall and office building Bay Holdings in industrial area respectively.
The listed real estate investment trust firm will distribute Sh127.88 million to shareholders, a 14 per cent reduction from Sh149.11 million distributable earnings recorded in previous year.
“This tax leakage at a property subsidiary level is expected to be resolved through the anticipated update of the tax legislation to expressly exempt I-REIT owned subsidiaries from income tax,” Makhoba said.
The fund faults the effect to increased property expenses by 13 per cent to Sh108.85 million in from Sh99.85 million, in line with the incorporation of the expenses from new property acquisition.
Irrecoverable withholding tax expenses increased as more tenants were appointed as withholding tax agents by KRA in 2018,” Makhoba said.
In statement by Base Titanium external affairs acting general manager Simon Wall in February 28, operational VAT refunds for the mining company had been pending for about nine months following KRAs introduction of a new system.
“This is issue is not unique to Base Titanium but is effecting the entire economy. We have assured by the Large Tax Payers Office at KRA that the issue is almost resolved and VAT refunds will recommence shortly,” Wall said.
The Australian mining firm was one of the companies that benefited from the refund, receiving Sh140 million in the April-June quarter of this year.
The horticulture industry also raised claims on delayed clearance of VAT return estimated at Sh3.5billion increasing the cost of produce in the international markets.
During the financial year ending June 2017, the taxman reported to have paid out Sh20.5 billion in VAT refunds.
In August 2018, National Treasury projected that about Sh14.4 billion will be paid out in VAT refunds to traders and manufactures in the financial period ending June 2019.
Businesses and traders have complained of delays in payment of refunds required as working capital hence constraining their cash flows.
This in turn increases the cost of doing businesses as companies find alternative sources of capital run operations.