The US State Department has listed delays in Value Added Tax (VAT) refunds as one of the obstacles affecting American investors in Kenya.
As detailed in the 2024 Investment Climate report, the State Department noted that the VAT refunds took more time than the six months that is stipulated in law.
Therefore, this affected the operation of businesses being run by US investors and also Kenyans.
VAT refunds ought to be processed in six months as was passed in the Finance Act 2023.
"Companies in Kenya, including US investors, experience a slow pace of value-added tax (VAT) refunds and an inability to offset future tax liabilities despite tax law stipulating a six-month time limit for VAT refunds or allowing offsets on future tax bills.
"The PwC 2020 Paying Taxes Report, which assesses countries based on the efficiency of their tax systems, reported that it took 27.3 weeks on average to obtain a VAT refund in Kenya," read the report in part.
On the other hand, the US government also highlighted that investors were facing challenges in getting operation licences on time.
"In 2023, Kenya pursued several tax and regulatory reforms aimed at improving the investment climate including removing the VAT on exported services, reimbursing verified tax refund claims within six months or allowing the taxpayer to offset the claims against future tax liabilities, and removing the tax on unrealized gains on employee-allocated shares for startup companies.
"Implementation of VAT refunds and offsets were still in progress in 2023. Despite regulatory reforms, US businesses operating in Kenya still face burdensome bureaucratic processes and delays in receiving necessary business licenses," the US government added.
According to the report, US Foreign Direct Investments (FDI) in Kenya in 2023 amounted to Ksh36.1 billion (USD 227 million).
However, this was a drop from the 2022 investments which were put at Ksh39 billion.
Some of the top US investments in Kenya cut across the tech sector, agriculture, and infrastructure among others.
