Finance Bill 2025 proposes reduction of timeline to lodge VAT refunds

Section 32 of the Bill seeks to amend Section 17(5)(d) of the VAT Act (2013) which dictates that any such excess tax - which is input tax exceeding output tax -  shall be paid to the registered person if they claim for the refund within twenty-four months from the date the tax becomes due and payable.

The Bill has proposed to slash the period by half, limiting the timeframe for refund applications from the date of the overpayment.

In Kenya, tax refunds can be awarded if a taxpayer has overpaid a tax under any tax law, and applies to the Kenya Revenue Authority (KRA) for its facilitation.

This refund of the excess tax or the overpaid tax is awarded within a set timeframe from the date of overpayment.

Kenyans can also opt to offset the overpaid tax against their outstanding tax debts and future tax liabilities, including instalment taxes and input VAT.

Section 47 of the Tax Procedures Act (TPA) dictates that KRA shall ascertain and determine any applications within ninety days, and can even subject it to an audit for further interrogation.

Part 2 (b) dictates that if KRA fails to refund after 6 months of ascertainment, the overpaid tax shall be automatically applied to offset the applicant's outstanding tax debt or future tax liabilities.

Refunds are also awarded if tax payments were made in error but the claim should be made within 12 months.

A scrutiny of the Bill by Deloitte sees the amendment as an intent to align refund application guidelines with the TPA.