Many Kenyans are yet to claim their tax refunds from the Kenya Revenue Authority (KRA) due to limited knowledge.
The procedure, however, is well known to corporates and businessmen who are able to afford tax advisory services from private consultants, leaving ordinary Kenyans in the dark about the whole process.
In January 2021, KRA set up a special unit to handle verification and payment tax refunds amid growing pressure from the private sector, as the tax refunds bill reached Ksh26 billion.
A tax refund is reimbursement of excess tax paid or tax paid in error in a given period. It arises when the tax liability is less than the taxes paid.
The different types of refunds include Value Added Tax (VAT), Income tax, Excise duty and Stamp duty.
A tax refund can arise in case an employer fails to grant relief to an employee who has an insurance policy or a mortgage on owner-occupied property.
Insurance policies considered for tax relief purposes are education and life policies. For an individual with a mortgage to qualify for tax relief, the mortgage must be from specific financial institutions.
An income tax refund can also arise where a taxpayer has not been granted personal relief during the year. Additionally, a tax refund arises where tax deducted at source is in excess of the final liability.
Cases that result in VAT refunds include tax paid in error on any supply, bad debt, excess input tax resulting from zero-rated supplies and overpayments or credits resulting from Withholding VAT.
In the case of tax paid in error, the claim should be lodged within 12 months from the date the tax was paid.
In the case of a bad debt, a tax refund is paid to a VAT registered business person who has accounted and paid tax on a supply, but has not received any payment after a period of three years from the date of that supply.
Claims for a refund for bad debt should be made within five years after which it becomes time-barred.
However, if the person recovers the tax from the recipient of the supply after receiving the refund, the tax should be paid within 30 days after the recovery date.
How to Claim Tax Refund
Application for a tax refund claim is made online on www.itax.kra.go.ke/KRA-Portal/.
For income tax, the documents required include tax a deduction card (Form P9) for claims relating to excess PAYE deductions, insurance policy certificates for claims relating to insurance relief, mortgage certificate from a financial institution for claims relating to interest on mortgage and withholding tax certificates for claims relating to tax deducted at source.
A refund claim should be made immediately after filing a tax return for the respective year. Upon approval or rejection of a claim, the taxpayer automatically receives an approval order or rejection order respectively via email.
Where a claim is fully supported in all aspects, it is processed within 90 days from the time of lodgment.