2025 Finance Bill changes may worsen cash crunch for Kenyan exporters
The proposed changes, if passed into law, would increase the period for refund ascertainment from the current 90 to 120 days, along with an extension of the audit window from 120 to 180 days.
The draft 2025 Finance Bill has introduced a new proposal that seeks to extend the timelines for the Kenya Revenue Authority (KRA) to process and repay tax refunds to businesses.
The proposed changes, if passed into law, would increase the period for refund ascertainment from the current 90 to 120 days, along with an extension of the audit window from 120 to 180 days.
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Consequently, this would mean much more waiting time for businesses who are reportedly struggling with delayed tax refunds that have hampered their cash flow and overall operations.
The Tax Procedures Act provides that businesses can get a tax refund when they pay more tax than they owe.
This often happens with the Value Added Tax (VAT), especially for companies that export goods, mainly because exporters don’t charge VAT on what they sell but still pay VAT on what they buy for production, hence end up with extra tax that the government is obliged to refund.
KRA is responsible for processing these refunds upon application by the taxpayer. It involves verification of the claim through documentation and sometimes audits, to ensure the legitimacy of the refund.
However, delays in processing have been a persistent issue, often due to resource constraints, lengthy verification procedures, and a backlog of claims, making timely refunds a critical concern for cash flow-dependent businesses.
Manufacturers in the country recently expressed concerns about delayed government tax refunds, amounting to not less than Sh16 billion, which are severely affecting their operations.
In one of its policy documents this year, the Kenya Association of Manufacturers (KAM) said the more than Sh15 billion KRA owes its members is causing business cash flow challenges.
The Association therefore recommended that the Sh2.5 billion monthly allocations to KRA for settling VAT refunds be doubled.
“Liquidity is the 'blood' that keeps the businesses running. The government should ensure the timely refund of VAT to businesses. This should include immediate settlement of the estimated Sh15 billion outstanding VAT refunds and increasing monthly allocation of VAT refunds to at least Sh4 billion,” KAM said.
“The National Treasury usually allocates Sh2.5 billion per month to the KRA for VAT refunds against a requirement of about Sh4 billion per month. This has several ripple effects, such as cash flow constraints, increased cost of doing business, reduced competitiveness, as well as slowed investment and expansion.”
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