Kenyan VAT Changes Announced

by Lorys Charalambous, Tax-News.com, Cyprus

07 October 2008

Kenyan President, Mwai Kibaki, has announced two VAT related initiatives at the country's second National Economic and Social Council meeting in Nairobi.

The first announcement will no doubt please business leaders, who have long complained about the amount of time it takes the Kenyan Revenue Service to issue VAT refunds. It can currently take over a year to arrange a refund. President Kibaki announced that he has instructed the Kenyan Revenue Authority to speed the process up, and that it should under no circumstances ever take longer than 60 days to issue a refund.

Secondly, following recent changes to the VAT regime in Kenya, including the removal of VAT in the 2008 budget from basic food staples such as rice in order to combat the global rise in commodity prices, the president has also announced the removal of VAT from bulk fuel used for the generation of power. Energy costs have recently spiralled upwards in Kenya, as in much of the rest of the world, and the government has come under increasing pressure to act and ameliorate the resulting hardship. It is hoped that this cut will allow energy suppliers to pass on savings and drastically cut bills.

It is hoped that by accelerating the VAT refund process, business will be able to reflect the savings in the final sale price of the affected goods, which they had thus far been unable to do due to cash flow issues resulting from the extensive delays at the Revenue Service.

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