The National Treasury recently issued a press release advising that verification of all VAT refund claims up to 31 December 2013 has been conducted. It explained that the exercise established that the total claims relating to this period amounted to KES 19.2 billion which shall be paid in two instalments. We attach a copy of the press release for your ease of reference.

The press release indicated that the first instalment of VAT refunds totaling KES 9.3 billion (this appears to be an error as the breakdown provided amounts to KES 9.7 billion) will be settled in the following manner:

  • KES 2.3 billion which relates to claimants with no debts, will be settled immediately.

  • KES 4.7 billion relates to claimants with debts amounting to KES 2 billion. The KRA is to reconcile the debts and any amount payable will thereafter be settled.

  • KES 2.7 billion relates to claimants who have debts of KES 11 billion. These will be reconciled with a view of having the debts settled.

The second instalment of KES 8 billion will be paid after verification and debt reconciliation. The entire process is projected to be completed by 30 March 2015.

According to Treasury, of the applications for refunds already verified, KES 1.9 billion will not be paid and it is important for the affected taxpayers to confirm that the reasons for non-payment are valid reasons based on the provisions of the VAT legislation. We make the following observations:

  1. Claimants should obtain details of any amounts deemed not payable under the verification process. Any issues should be resolved and the refund due agreed upon in advance.

  2. Out of the first instalment of KES 9.3 billion, KES 4.7 billion may be withheld as it relates to debt. Claimants should enquire of the KRA about the nature of the debt and confirm they do not relate to disputed amounts, in which case there would be no basis for reconciliation and the total amounts should be paid. 

  3. Claimants should also follow up on the status of their refunds to ensure they are being processed and are scheduled for payment on or before 30 March 2015.