VAT Module 7: Refund of VAT ©Dr. Wakaguyu wa-Kiburi (www.taxkenya.com) 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Scope Introduction; Refund of tax paid in error; Refund of tax on bad debts; Normal refunds. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Introduction Refund of tax means that the Commissioner will give back what had been paid as VAT. Not refunded until applied for. The Commissioner will refund cash:- unlike input tax before registration. Taxpayer can decide how the VAT refunds will be utilized Taxpayer must do this in writing. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax Paid in Error Where tax is paid in error in respect of any supply the Commissioner unless otherwise provided in the regulations shall refund such tax. When can VAT be paid in error? a) b) c) 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax Paid in Error cont’ Condition: Refund due only if claim is lodged within Twelve (12) months from the date the tax became due and payable under Section 19. Refund only from Zero-rate supplies Section 19 – when tax is due. If not claimed what happens? Can taxpayer seek for time extension? 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax on Bad Debts What is a bad debt? What is tax on bad debts? Applicable :- where a registered person has Made a supply. Accounted for the tax. Paid the VAT on the supply but Not received any payments from the person liable to pay the tax. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax on Bad Debts cont’ Note the word May – taxpayer has a choice. After 3 years from the date the supply was made or Where the person has become insolvent. Apply for refund subject to the regulations. Questions Does the 3 year rule apply in case of insolvency? 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax on Bad Debts cont’ How about bankruptcy in case the recipient is an individual? Note: The Commissioner may refund the tax – it is a final decision final. No application is allowed after 5 years from the date of supply. Q.. Can a person apply for time extension? 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Refund of Tax on Bad Debts cont’ Subsequent recovery – in case the refunded VAT is recovered later, the registered person will refund the Commissioner within 30 days from the date of recovery. Failure to refund the VAT – interest at 2 % per month or part thereof of the tax refunded will be due and payable. Interests should not exceed 100% of the refunded amount (since 2010) 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Templates Used What templates are used to claim the refund in i-Tax? What is the process of claiming the VAT refund? Does one provide evidence of attempts to collect the bad debt? Note – Current VAT Act is silent on all three. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Evidence of Attempts to Collect In case evidence is required…. Communication – between the taxpayers and the customer/client. Attempts to collect the debt – letter from the chief, emissaries, letters from lawyers, auction threats, police reports etc. Court cases etc. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Normal Refunds Refund due to normal day to day operations from: Zero rated supplies – Second Schedule. On taxable goods (16 % & 8 %) that are made zero rated. On exported exempt goods. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Normal Refunds cont’ Must be claimed within 12 months of becoming payable. Input tax must be reported within 6 months of incurring in i-Tax system. Refund claimed through i-Tax platform. Download the Court ruling on delayed VAT refunds … payment of interest for delayed payments by the Commissioner. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi Q & A 1. 2. 3. 4. 5. 8/31/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu Wa Kiburi