Despite ongoing efforts to resolve the returns issue, the government still owes Kenyan firms Sh12 billion in tax refunds. According to the Kenya Revenue Authority (KRA), the stock of refunds, which stood at Sh31.2 billion in April, is now being cleared.
In order to limit the impact of tax refunds on the government, Treasury recommends that taxpayers who file delayed return claims utilize the money to offset future tax payments.
If the proposed amendment to Finance Bill 2023 is passed, taxpayers would be able to deduct any future tax liabilities from any overpayment that the government has failed to reimburse for at least six months when the application was made with KRA.
During the peak of the COVID-19 pandemic, the government’s fiscal stimulus program included the settling of VAT refunds.
On former President Uhuru Kenyatta’s directives, the KRA declared in October 2020 that it had paid out $100.0 million, or roughly Sh10.9 billion at the time, in settlement of Value Added Tax refunds. Each fiscal year, the Kenya Revenue Authority (KRA) collects Sh407.2 billion in VAT revenue, with domestic goods and services accounting for 53% of the total.
It is the second-largest source of tax revenue, behind income tax, which includes corporation tax and pay as you earn.
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