The Kenya Revenue Authority (KRA) has reduced the time it takes to process Value Added Tax (VAT) refunds by 59.8 per cent, bringing the timeline down from 102 days in the 2020/2021 financial year to just 41 days as of June 2024.
This efficiency boost is attributed to the development of internal Service Level Agreements (SLAs) within the refund process and the introduction of daily reports to eliminate case backlogs.
These efforts align with legal requirements to process claims within stipulated timeframes, promoting business compliance.
VAT refunds are primarily claimed by businesses dealing in zero-rated goods and services, which are exempt from the standard 16 per cent VAT.
Timely refunds are crucial, as delayed payments can negatively impact the cash flow of businesses, restricting their working capital.
The reduction in processing time follows the rollout of the National Tax Policy, aimed at enhancing the timely disbursement of refunds.
"Various measures have been put in place to enhance refund processing and payments. Apart from ensuring optimal allocation for settlement of refunds," the taxman said in a statement.
"KRA has also overseen the implementation of the Finance Act 2023 (Tax Procedures Act, 2015 - Section 47) which allows taxpayers to offset refund claims against outstanding tax debt or future tax liabilities where the Commissioner has not paid approved refunds within 6 months."
By the end of October 2023, KRA had verified tax refund claims worth Sh 16.3 billion, including Sh2.8 billion in income tax and Sh 13.6 billion in VAT.
In addition to ensuring optimal budget allocation for refunds, KRA is implementing the Finance Act 2023, which allows taxpayers to offset refund claims against outstanding tax debts or future liabilities if refunds remain unpaid after six months.
As of October 2023, KRA had approved unpaid VAT claims amounting to Sh13.6 billion, with Sh8.6 billion eligible for offset against tax liabilities starting January 2024.
KRA has also enhanced its systems, integrating its iTax and iCMS platforms for real-time export verification, a key driver of VAT refunds.
The introduction of the Electronic Tax Invoicing Management System (eTIMS) has further streamlined the process by providing instant data relay, improving cash flow for businesses.
To ensure timely audits and reconciliation of tax ledgers, KRA has established specialized teams at regional audit centers.
The authority says it has also introduced a risk-profiling tool to focus on high-risk cases, avoiding unnecessary delays in processing refunds for first-time claimants.
These efforts are expected to ease liquidity constraints for businesses, fostering a more favorable environment for trade in Kenya.
