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Nakumatt suppliers seek Sh2 billion VAT refunds

Nakumatt Lifestyle
Nakumatt Lifestyle branch at Hazina Towers shut its doors on January 2, 2018. FILE PHOTO | NMG 

Suppliers of collapsed Nakumatt Holdings are seeking more than Sh2 billion in value added tax (VAT) refunds, a claim arising from the retailer’s default to the tune of Sh18.5 billion.

In a letter addressed to the Kenya Revenue Authority (KRA) Commissioner General Githii Mburu, Suppliers Association of Kenya chief executive Ishmail Bett has asked the taxman to allow them to start the process of recouping the taxes they paid.

The law requires companies to pay VAT (at a rate of 16 percent on most goods) whenever they sell in cash or on credit.

If the goods are sold on credit and the customer defaults, a company can write off the bad debt and claim VAT refunds from the taxman.

Tax specialists say that in practice, the KRA does not wire cash to such claimants but allows them to deduct the amounts against future tax obligations.

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“Based on the latest statement by the company, suppliers were owed monies amounting to Sh18.5 billion, forming the largest share of the credit amount,” reads part of the letter dated January 23, 2020.

“The purpose of this letter is to therefore request Kenya Revenue Authority to issue a notice to our members who are unsecured creditors (suppliers) owed money by Nakumatt Holdings to facilitate the writing of bad debts owed.”

The former retail chain giant went into administration on January 22, 2018 after defaulting on a host of creditors including suppliers, banks and investors in commercial paper.

Nakumatt’s creditors recently passed a resolution to liquidate the company after it became clear it could not be rescued.

Gross proceeds from the sale of its remaining assets is estimated at Sh422 million and is not enough to compensate secured creditors.

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