What is a tax refund?
A tax refund is a reimbursement of excess tax paid or tax paid in error in a given period.
What are the benefits of tax refunds?
- Tax refunds resulting from zero rating of exportation of goods allow exporters to be more competitive in the foreign market and allow them to plough it back into the business.
- Ensure affordability of certain goods and services deemed as essentials e.g. zero rating of bread, milk, flour.
- To ensure equity where tax is deducted in error
What are the types of tax refunds?
Income Tax Refunds
This refund will arise from tax overpayments by both individual and corporate taxpayers.
The following circumstances may lead to an income tax refund:
- Over deduction of tax(PAYE) by the employer
- Tax incentives on mortgage interest relief, insurance premium relief, and annual tax relief
- Exemption on account of disability.
- Overpayment of Instalment Taxes
- Withholding Tax
- Advance Tax credits
NB: A claim for an Income Tax refund must be made within five (5) years from the date the tax was paid.
VAT refunds occur as a result of overpayment of taxes as a result of:
- Excess credits as a result of zero-rated supplies
- Excess credits arising out of withholding VAT
- Bad debts- after a period of three years but not more than 4 years from the date of that supply (where a registered person has made a supply and has accounted for and paid tax on that supply and has not received any payment from the person liable to pay the tax)
Excise Tax Refunds
Occurs when a person dealing with excisable goods manufactured in or imported into Kenya has paid excise duty.
The Commissioner shall, on application by the person, refund the excise duty paid if satisfied that
- Before being consumed or used in Kenya
- The goods have been damaged or stolen during the voyage or transportation to Kenya
- The buyer has returned the goods in accordance with the contract of sale.
- The excise duty paid in respect of spirits or illuminating kerosene that have subsequently been used by a licensed or registered manufacturer to manufacture un-excisable goods.
How can one Apply for a Refund?
1. Logon to itax.kra.go.ke by entering your KRA PIN and Password
2. On the iTax menu, select the tax obligation under the refunds menu
3. Confirm taxpayer details and click next
4. Fill in the taxpayer’s bank account details and click next
5. Select your refund type, the claim reason, the description of the reason for the claim, the amount, upload supporting documents then submit.
Tips For Applying For Refunds
- Apply for claims via iTax within the stipulated period.
- All claims must have valid debt status reports before refund processing.
- All first-time claimants will be subjected to a pre-payment audit
Tax Refund Offences
Fraudulent/false claim of refund will attract a penalty of an amount equal to two times the amount of the claim.