Hope for businesses as KRA starts paying Sh10 billion tax refunds

In Summary

•The refunds are expected to offer financial relief to businesses worst hit by the Covid-19 pandemic, especially the horticulture, transport and hospitality sectors.

• “Only those businesses entities that have had their refunds claims verified in line with procedures will receive payments,” - commissioner of domestic taxes.

Treasury buildings.
Treasury buildings.
Image: FILE

The Kenya Revenue Authority has began paying Sh10 billion in VAT refunds to businesses following President Uhuru Kenyatta's directive last month.

“We have began paying various businesses entities VAT refunds from special funds allocated by the government and released to KRA and expect to finalise the payments process in one week," commissioner for domestic taxes Elizabeth Meyo said in a statement on Saturday.

The refunds are expected to offer financial relief to businesses worst hit by the Covid-19 pandemic, especially the horticulture, transport and hospitality sectors. “Only those businesses entities that have had their refunds claims verified in line with procedures will receive payments,” Meyo said.

 

Industries have been struggling with low liquidity amid piling pending bills by the government.

Cabinet Secretary Ukur Yatani had last month said disbursement of Sh13 billion owed in pending bills and a further Sh10 billion tax refunds were to commence on April 24.

The government owes approximately Sh27 billion in VAT refunds on exports to manufacturers and exporters.

According to KAM, the national government and counties owe manufacturers in excess of Sh180 billion.

There is another approximately Sh100 billion in withholding VAT, due by KRA appointed agents from payments made for local taxable supplies (goods and services).

The portion of VAT that is withheld is six per cent out of the 16 per cent chargeable VAT, currently reduced to 14 per cent over coronavirus effects on the economy.

Pending bills owed by the national government is approximately Sh56 billion. However, Sh43 billion is contested.

“The figure owed by county governments is unknown at the moment,” Gudka said.

 

Latest data shows Kenya Revenue Authority (KRA) rejected Sh6.1 billion VAT refund claims in the financial year to December 2019, after a scrutiny of applications.

 

During the half-year period (July-December) KRA paid VAT refund claims amounting to Sh9 billion.

Delays in refund have been partly caused by lodging of inaccurate claims by taxpayers (wrong declarations), Meyo had said earlier.