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KRA Headquarters at Times Tower in Nairobi. /CFM-FILE.

Kenya

KRA starts paying Sh10 billion in VAT refunds after Uhuru directive

NAIROBI, Kenya, May 30- Kenya Revenue Authority has begun paying out Sh10 billion in Value Added Tax refunds following a presidential directive and release of funds by the National Treasury.

In a statement, Commissioner for Domestic Taxes Elizabeth Meyo said the exercise is expected to be finalized in one week.

 The refunds are aimed at offering financial relief to businesses worst hit by the COVID-19 pandemic especially the horticulture, transport and hospitality sectors of the economy.

Meyo pointed out that only business entities that have had their refund claims verified in line with procedures will receive payments.

“We have begun paying various business entities’ VAT refunds from special funds allocated by the government and released to KRA and expect to finalize the payments process in one Week,” Meyo stated.

On March 25, President Uhuru Kenyatta ordered the National Treasury to effect an immediate reduction of VAT from 16 percent to 14 percent which took effect on April 1.

He also directed KRA to expedite the payment of all verified VAT refund claims amounting to Sh10 Billion and allow for offsetting of withholding VAT, in order to improve cash flows for businesses.

“Similarly, and to improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows, the private sector is also encouraged to clear all outstanding payments among themselves; within three weeks from the date hereof,” the president said.

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He also ordered for a hundred percent tax relief for persons earning gross monthly income of up to Sh24, 000, as part of measures announced to cushion Kenyans against the impact of the coronavirus pandemic.

He directed for the reduction of income tax rate (Pay-As-You-Earn) from 30 percent to 25 percent, a directive that has since been implemented by KRA.

Other taxes that saw a reduction include the reduction of resident income tax from 30 percent to 25 percent, and the reduction of turnover tax rate from the current 3 percent to 1 percent.

Turnover tax came into effect in January, and targeted micro, small and medium enterprises who have been hit hard by the pandemic.

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