The Treasury is on course to slap new tax refund rules, which will warrant proving the validity of VAT claims. Getting refunds will be tricky in the proposed laws, with the move seen as protecting the VAT amidst KRA estimates of Sh465 billion for this fiscal year.
According to the proposed Finance Bill 2020, “If at the time when a deduction for input tax would otherwise be allowable….the person does not hold documentation…or a registered supplier has not declared the sales invoice in return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation.”
This means buyers with registered VATs will have to ensure vendors’ validity for VAT tax return. Each returned form will have to show a clear invoice of the claimed goods, services, and the levy charged. If no such tax shows on the particular customer, the vendor’s VAT return claim becomes invalid.
Tax experts remain skeptical of the measure.
“It’s not practical because it presumes that a buyer can go to each supplier and ensure that they have remitted the VAT return showing that the particular purchase was charged VAT,” said Bowmans Kenya tax consultant Nikhil Hira.
