VAT REFUNDS

Exporters, manufacturers set for quick VAT refunds after committee's approval

Outstanding claims were worth Sh24.3 billion in financial year ending June, up from Sh21.3 billion and Sh13.3 same period in 2018 and 2017.

In Summary

•The refund claims stocks were 6,106 claims as at the end of June 30, including claims under verification at refund unit, pending export verification and cases relating to VAT on bad debts.

•The report showed that the implementation of the 2017 regulations restricted input VAT for exporters who have a small percentage of local sales creating a perpetual VAT payment which they cannot recover

A trader sells horticultural products in Kakamega town. /FILE
A trader sells horticultural products in Kakamega town. /FILE

A House committee has approved a new VAT refund formula aimed at dealing with piling backlog of claims from exporters and manufacturers which stood at Sh24.3 billion as at  June.

The National Assembly Committee on Delegated Legislation, endorsed the proposed  revised formula expected to guarantee exporters and manufactures a reduction in input costs by calculating the amount as a refund of a share of input Value Added Tax.

 

The current formula restricted firms to claim refunds on zero-rated supplies only.

 
 

The amendment to the current VAT Regulations 2017 was contained in the  2019/2020 financial year budget statement following  concerns from companies over cash flow challenges.

“The committee recommends that the House approves the said statutory instrument in accordance with section 67 of the Value Added Tax Act (No 35 of 2013).” says the report. 

The committee chaired by Uasin Gishu county woman representative Gladys Shollei, said the existing formula lengthened the recovery process leading to piling up of claims

Kenya Revenue Authority obligates the taxpayers to provide a certificate from a competent authority in the country where the goods were exported to, conforming that the goods landed and requisite taxes paid.

This has led to a huge backlog of VAT refunds and disputes as taxpayers were unable to meet the KRA documentation.

The refund claims stocks were 6,106 claims as at the end of June 30, including claims under verification at refund unit, pending export verification and cases relating to VAT on bad debts or requiring additional documents from taxpayers.

 
 
 

The claims were worth Sh24.3 billion, up from Sh21.3 billion and Sh13.3 not processed as at end of financial years ending June 2018 and 2017 respectively.

In 2018/2029 financial year, there were refund claim totalling to Sh47.8 billion out of which Sh26.5 billion had been lodged in the year.

Firms including Australian mining company, Base Resources have also said that more than Sh20 billion as tax refunds has not been paid since it started operations in Kenya nine years ago.

In the company’s latest report released in June, the miner has only received Sh3.5 billion.