KRA now sets up special unit for tax refunds

The taxman has opted to set up a special unit to handle verification and payment tax refunds amid growing pressure from the private sector.

The Kenya Kenya Revenue Authority (KRA) says "dedicated unit" will speed up the processing of refunds in line with President Uhuru Kenyatta’s directive to State entities to clear arrears within three months.

The taxman has over the years struggled to clear Value Added Tax (VAT) refund claims arising from zero-rated supplies, with the bills standing at Sh26.2 billion last September.

Lengthy verification process amid inadequate cash provided by the Treasury has traditionally delayed processing and payment of VAT refunds, piling pressure on cash flow positions of manufacturers especially those in the export business.

KRA Commissioner for Domestic Taxes Elizabeth Meyo says the unit will “undertake data correction and ledger update” in a bid to “expedite processing of refunds”.

The taxman has also developed a separate system, dubbed Green Channel, for processing claims for firms operating in sectors, and dealing in products, with low risk of fraud—those with a high concentration of zero-rated VAT supplies.

“Introduction of a Green Channel allows for express payment of refunds once lodged by taxpayers. This approach will favour taxpayers that are consistently tax compliant,” Ms Meyo said via email.

Companies in milling, horticultural and tea sectors have been approved to be processed through the new window for express payment of VAT refunds, she added.

“The rollout of the Green Channel for VAT refunds is expected to improve the speed and efficiency of VAT refunds for the taxpayers who are viewed by the KRA as low risk and have a history of high compliance,” Stephen Waweru, a senior manager for tax services at consultancy and audit firm KPMG said.

“This measure is expected to drive compliance among taxpayers who would have an assurance that their VAT claims and refunds would be processed speedily.”