NAIROBI, Kenya – The Kenya Revenue Authority (KRA) has failed to refund nearly Sh905 million in overpaid taxes to the National Social Security Fund (NSSF), almost three decades after the erroneous payments were made.
According to the latest audit report by Auditor General Nancy Gathungu, the taxes were mistakenly remitted in 1996 and 1997—despite the NSSF being tax-exempt as a government-controlled pension scheme.
“The tax refund due from KRA relates to 1996 and 1997 income tax return amounts of Sh493 million and Sh411 million that were inadvertently paid to the KRA after the Fund had become tax exempt,” Gathungu stated in her report covering the financial year ended June 2024.
The pension fund, which generates income through investments in property and other ventures, is exempt from income tax so long as any surplus is allocated to members’ individual accounts. Despite this status, the refund remains unpaid—and without interest.
“The Fund has not been getting any returns on the long outstanding tax receivable balance of Sh940.3 million,” the Auditor General added, faulting the NSSF for not actively pursuing the refund.
The report shows that aside from the Sh904.9 million in erroneous income tax payments, KRA also owes the fund Sh28.4 million in tax paid on bank interest, and Sh6.49 million in low-interest tax, bringing the total to Sh940.33 million.
Audit Exposes Larger Refund Problem at KRA
The case highlights a systemic issue with delayed tax refunds in Kenya.
KRA has come under repeated fire from businesses and public institutions over failure to process refunds—including overpaid income taxes and value-added tax (VAT)—in a timely manner.
In 2020, the government introduced a policy requiring KRA to pay interest on delayed refunds.
The law stipulates a 2% monthly interest if a valid refund claim remains unpaid after three months.
But Gathungu’s report reveals that NSSF has not received any interest on its pending refund—nearly 30 years later.
Questions Over NSSF’s Oversight
While the report condemns KRA’s failure to release the funds, it also criticizes NSSF for lack of follow-up.
“There is no evidence the Fund aggressively pursued the refund,” the Auditor General noted.
Under tax exemption rules introduced in 2002, NSSF is required to submit audited annual reports to KRA within nine months of the end of each financial year and conduct an asset valuation every three years. Before this, the exemption was unconditional.
