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Kenya: Withholding VAT credits; offsets against other tax liabilities

Kenya: Withholding VAT credits

The value added tax (VAT) law has been amended to allow offsetting withholding VAT credits against other tax obligations or refunds of the credits when set-offs are not possible.


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Amendments to the VAT law were published in September 2019, and taxpayers with outstanding withholding VAT credits can now apply for set-offs or refunds. Subsequently, an application for a set-off / refund is to be made via the portal “iTax” within 24 months from the date when the VAT was due and payable. For credits accrued prior to these amendments to the VAT law, taxpayers must apply for a refund within 12 months from the law’s effective date. Refunds are limited to credits that were due and payable within a period of 36 months prior to the effective date.

The amendments allow for a refund of withholding VAT credits subject to certain conditions. 

KPMG observation

These changes to the VAT law aim to address situations when taxpayers accrue excess credit as a result of withholding VAT that otherwise could be carried in perpetuity, thereby leading to an increased cost of business. While it is possible that there are taxpayers who have credits that go beyond the 36-month cap, the amendment is seen by tax professionals providing relief. It also aligns well with recent proposals under the Finance Bill, 2019 to reduce the withholding VAT rate from 6% to 2%.

Read an October 2019 report [PDF 205 KB] prepared by the KPMG member firm in Kenya

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