NAIROBI, Kenya – The Kenya Revenue Authority (KRA) has significantly cut the time it takes to process Value Added Tax (VAT) refunds by nearly 60%, reducing the turnaround from 102 days in the 2020/2021 financial year to just 41 days as of June 2024.
This improvement, hailed as a critical step toward easing liquidity for businesses, is the result of strategic internal reforms.
KRA introduced Service Level Agreements (SLAs) to streamline the refund process and implemented daily reports to eliminate backlogs, aligning with legal requirements for timely processing.
“These reforms are designed to ensure compliance while enhancing business efficiency. Timely VAT refunds are crucial for maintaining healthy cash flows, particularly for businesses dealing in zero-rated goods and services,” KRA said in a statement.
The timely release of VAT refunds is essential for businesses, especially those engaged in zero-rated supplies, which are exempt from the standard 16% VAT.
Delays in refunds often restrict working capital, making KRA’s reforms a welcome relief to the business community.
KRA’s efficiency efforts come on the back of the recently rolled-out National Tax Policy, which prioritizes quicker disbursement of tax refunds.
The Finance Act 2023 further strengthens these reforms by allowing businesses to offset approved VAT refunds against outstanding tax debts or future liabilities if refunds remain unpaid after six months.
As of October 2023, KRA had verified VAT refund claims totaling KSh 13.6 billion, with KSh 8.6 billion eligible for tax offsets starting January 2024.
This follows the authority’s integration of its iTax and iCMS platforms for real-time verification of exports—a key driver of VAT refund claims.
Additionally, KRA has introduced the Electronic Tax Invoicing Management System (eTIMS), which facilitates instant relay of tax data, accelerating refund processes and improving cash flow for businesses.
Specialized audit teams and a new risk-profiling tool have also been deployed to fast-track refunds, particularly for first-time claimants.
This improvement, hailed as a critical step toward easing liquidity for businesses, is the result of strategic internal reforms.
KRA introduced Service Level Agreements (SLAs) to streamline the refund process and implemented daily reports to eliminate backlogs, aligning with legal requirements for timely processing.
“These reforms are designed to ensure compliance while enhancing business efficiency. Timely VAT refunds are crucial for maintaining healthy cash flows, particularly for businesses dealing in zero-rated goods and services,” KRA said in a statement.
The timely release of VAT refunds is essential for businesses, especially those engaged in zero-rated supplies, which are exempt from the standard 16% VAT.
Delays in refunds often restrict working capital, making KRA’s reforms a welcome relief to the business community.
KRA’s efficiency efforts come on the back of the recently rolled-out National Tax Policy, which prioritizes quicker disbursement of tax refunds.
The Finance Act 2023 further strengthens these reforms by allowing businesses to offset approved VAT refunds against outstanding tax debts or future liabilities if refunds remain unpaid after six months.
As of October 2023, KRA had verified VAT refund claims totaling KSh 13.6 billion, with KSh 8.6 billion eligible for tax offsets starting January 2024.
This follows the authority’s integration of its iTax and iCMS platforms for real-time verification of exports—a key driver of VAT refund claims.
Additionally, KRA has introduced the Electronic Tax Invoicing Management System (eTIMS), which facilitates instant relay of tax data, accelerating refund processes and improving cash flow for businesses.
Specialized audit teams and a new risk-profiling tool have also been deployed to fast-track refunds, particularly for first-time claimants.
