5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
VAT REFUND PROCEDURES
OPPORTUNITIES AND CHALLENGES
THE KENYAN EXERIENCE
1.0
INTRODUCTION
In the light of the apparent world trend towards shifting from direct to indirect
taxes, Value Added Tax (VAT) is emerging as the tax for the future. Its
adoption has been phenomenal with more that one hundred countries now
administering VAT. The tax is usually associated with unique features which
among others include its broad base which enables wider tapping of revenue
potentials, its ability to focus benefits and incentives to targeted sectors through
zero rating, and self crediting system which eliminates double taxation within
the multi-stages of supply.
VAT was introduced in Kenya in the fiscal year 1989/1990. It replaced Sales
Tax which had been in operation since July, 1973. The VAT in Kenya is
administered under the VAT Act Cap. 476 of the Laws of Kenya. The Act
specifically provides for refund of tax incurred under various circumstances.
This paper analyses the various circumstances that give rise to refund claims,
the advantage of such refunds and the challenges the VAT Department faces in
fulfilling its obligation to refund the rightful claimants.
2.0
PROVISIONS FOR REFUNDS IN THE VAT ACT
2.1
The VAT Act has various provisions for refund of VAT paid on inputs
and other supplies purchased by registered persons and other consumers in
general. The provisions include:
2.1.1 Zero rating
(i)
The concept of zero rating was introduced in Kenya at the inception of
VAT in the 1989/90 budget. It imposes VAT at zero rate on specified supplies
and goods. The supplies and goods that are zero-rated are contained in Parts A
and B of the Fifth Schedule to the VAT Act Cap. 476 of the laws of Kenya.
In the 1989/90 budget, the Fifth Schedule zero-rated only exports. The list was
expanded in the 1990/91 budget to include other supplies such as those to Aid
Funded Projects and Export Processing Zones as well as introducing the Eighth
Schedule which contained the list of Public Bodies, Privileged Persons,
Institutions and persons with diplomatic privileges, who were entitled to import
or purchase goods tax free. Zero rating was also extended to some essential
goods which hitherto were exempted from VAT. The essential goods included
fresh milk, medicines and other pharmaceutical products, fertilizers, agricultural
and other farming machinery, implements and tools, books and other
educational materials, hand tools and implements, equipments and motor
vehicles for medical use among others. Both the 5th and 8th schedules have been
reviewed in the subsequent years and as per the current financial year
(2002/2003) the lists of zero rated supplies stands as follows:
0 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA

Zero rated supplies under Part A of the 5th Schedule are fourteen (14).

Zero rated goods under Part B of the 5th Schedule are approximately
four hundred.

Public bodies, Privileged Persons and Institutions with zero rated status
under Part A of the Eighth Schedule are twenty-three (23).

Special goods subject to zero rating under Part B of the Eighth Schedule
are twenty (20).

Zero rating of goods and services imported or purchased by persons with
Diplomatic Privileges under Part C of the Eighth Schedule.
Despite the above long lists of items that are zero rated, there is still pressure
from consultants and other lobby groups for more. Specifically there have been
submissions every year for zero rating for basic food products such as flour,
milk, maize, rice etc.
(ii)
How do refunds arise under zero rating?
As explained above, zero rating means that the supplies have to be taxed 0%.
However, in the process of making such supplies taxable persons incur input
tax. Under the normal operation of the VAT system, a taxable person is
expected to deduct input tax incurred in the course of making taxable supplies
from the output tax charged on sales when submitting returns. In the case of
persons making zero rated supplies, the output tax is nil, thereby rendering the
returns to be in repayment. Section 11(2) of the Kenyan VAT Act provides for
the Commissioner to refund any excess input tax that arises from making zerorated supplies.
(iii)

Types of Refunds arising from zero rating
Exportation of taxable goods contributes 47% of the total refunds claim
under the Kenya VAT system. All exports are zero-rated. Under the
system, exportation includes supply of tea and coffee at auction center
and supplies to Export Processing Zones and manufactures under bond.
On the other hand the Kenyan VAT act has no provisions for remission
of tax to exporters. Therefore exporters have to pay tax on their inputs.
Consequently where a taxpayer wholly or substantially deals in
exportation the returns will bear excess input tax which is lodged as
refund claim.

Manufacturers of zero-rated goods contributes 27% of the total refund
claims. The manufacturers have to pay VAT on their inputs and claim
back the same with proof of supply of the zero rated goods reflected in
the monthly returns.

Other claims arise from supplies to exporters, supply of services to
aircrafts in transit and supply of services in respect of goods in transit.
The claimants are mainly transporters and goods handlers.
1 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA

Foreign Aid funded Projects where the contractors have to pay tax on
the materials and claims refund of the same.

Supplies to privileged persons and organizations. These are mainly
diplomatic personnel who have to purchase supplies with tax and claim
refund on confirmation by the Ministry of Foreign Affairs.

Supplies made through third parties to privileged persons and bodies e.g.
NAAFI, AFCO and Armed Forces. Such supplies pay tax and claim
refund with proof of supply to such persons.
2.1.2
Physical Capital Investments
Section 11(2) of the Kenyan VAT Act provides for refund of excess
inputs tax arising from physical capital investments where input tax
deducted exceeds one million shillings and the investment is used in
making taxable supplies. Since this provision was introduced in the
1999 budget there has been a steady increase in refund claims on major
investments, such as by mobile phone service providers and metal
industry. Such claims now contribute to approximately 22% of total
claims.
2.1.3
Tax paid before registration
Section 12 of the VAT Act provides for a newly registered taxpayers to
claim refund of tax paid on:

Taxable goods in stock

Constructed buildings, civil works and purchased assets.
Under normal circumstances, the Commissioner would only issued a
letter to authorize such a person to deduct the input tax in the monthly
returns. However if such tax is incurred in goods which are
subsequently used in making zero-rated supplies or in physical capital
investment the taxpayer would claim refund after the Commissioner has
granted the authority.
2.1.4
Tax Paid In Error
Section 24 provides for refund of tax paid in error.
Claims mainly arise from use of wrong tariffs at customs declaration and
use of wrong tax rates on local purchases. The category also includes
cases where the Minister grants remission after the tax had been paid.
2.1.5
Remission or refund of tax on bad debts
Section 24A provides for remission or refund of tax paid on bad debt
where a registered person has accounted and paid the tax charged but
has not received any payment from the client. In the case of normal
debt, the refund is payable after three years, while there the client has
become legally insolvent, immediately evidence of insolvency is
provided to the Commissioner.
2 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
2.1.6
3.0
Refund on Public Interest
Section 24 provides for the Minister to authorize refund of tax paid on
goods where he is satisfied that it is in public interest to do so. This will
apply mainly to cases where the Minister grants remission after the tax
had been paid.
REFUNDS CLAIMING & PROCESSING PROCEDURES
3.1
VAT refund is claimed using two types of forms
 VAT 4 for refunds arising from zero rating, physical capital
investment, rebate of bad debts and tax pain in error.
 VAT 5 for claim for relief from tax paid on stock, assets and
buildings by a newly registered person.
3.2
All refund claims are submitted to the headquarters where they are
sorted, numbered and recorded both in the manual books and computer.
Refund claims that are not accepted are immediately returned to the
claimant with appropriate comments that entry into the manual register.
Such claims are normally time barred and those with inadequate
supporting documents are returned.
3.3
All claims by registered persons must be accompanied by the
appropriate copies of the monthly returns for the period of claim. Other
documents e.g. invoice and import entries are just listed in the VAT 4
form and are presented to the department during audit or when
demanded.
3.4
Claims by unregistered persons and those arising from tax paid in error,
bad debts, refund on public interest and physical capital investments
must be accompanied by the relevant documents.
3.5
The VAT Law currently provides for payment of claims of Kshs. 1
million (US$12,658) and above on the basis of auditor’s certificate
issued by the claimant’s auditor. Such claims are therefore paid without
prior audit by the department unless the claimant is lodging a claim for
the first time or the department has valid reason for such audit. Claims
of below Kshs. 100,000 (US$1266) are also paid without prior audit
unless the department has similar reasons to carry out an audit.
Claims paid on the basis of auditor’s certificates are audited during
normal verification of the taxpayers records. However every now and
then, the Department selects claims for immediate post payment audits
to confirm genuineness and correctness.
3.7
For a registered taxpayer, refund is paid only if the monthly returns are
up to date.
3.8
Any claims that are more than 12 months are time barred.
3 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
3.9
To minimize risk of diversion of cheques, most of the refunds are paid
directly through bank transfers to the claimant’s accounts. Only refunds
to unregistered persons are paid by cheque.
3.10
The Department committed through Taxpayers Charter to refund claims
within 60 days. However current backlog goes to 120 days. Amounts
involved in each of the 3 financial years were as follows.
Year
Amount (US$)
(000,000)*
1999/2000
9
2000/01
13.6
2001/02
20.3
* Exchange rate – Kshs. 79 @$1
4.0
% of claims paid
25%
27%
36%
3.11
Paid refunds and any adjustment to the amount claimed are entered into
the taxpayer ledger (computerized).
3.12
Inter departmental set-off of tax was introduced between KRA
departments, in the 2001/2002 budget.
VAT REFUND TRENDS
4.1
Due to unreliability of statistics prior to 1999/2000, this analysis is
confined to the latest 3 fiscal year – i.e. 1999/2000, 2000/2001 and
2001/2002.







Revenue growth was 19% in 2000/2001 and 2% in 2001/2002.
Regular refunds arising from Exports, Zero Rated Products and
Capital Investment constituted 98% of total refund claims.
The percentage of refunds to local VAT Revenue rose from 14% in
1999/2000 to 20% in 2001/2002.
Refund claims grew by 65% in 2000/2001 and 21% in 2001/2002.
Rejected refunds claims formed 23% of total claimed in 2001/2002.
Refunds backlog stands at Kshs.1,607 million (US$20.3million)
being 32% of accepted claims in year 2001/2002.
Refund claims paid were 78% of accepted refund claims.
Major factors that attributed to the upward trends in refunds were:




5.0
Increase in exportation of horticultural and agricultural products.
Increased trade in COMESA and E.A. Cooperation.
Introduction of refund on physical capital investment in the
1999/2000 budget.
Increased taxpayer awareness.
OPPORTUNITIES AND CHALLENGES
5.1
Opportunities
The Kenyan experience in VAT refunds administration has shown that
there are certain opportunities that both the taxpayer and VAT
administration can take advantage of. These include:
4 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA






5.2
Source of funds for taxpayers to boost their operation.
Business opportunity for auditors that have been involved in audit of
refunds
Opportunity for VAT administration to detect malpractice because of
more frequent audits and also involvement of auditors. Data is also
collected to enable counter checking.
Involvement of auditors has released more resources for VAT
administration to do revenue-oriented audits.
Improvement in record keeping and general tax knowledge to the
traders because of involvement of their own agents in tax audits.
Set-off has provided avenue for exchange of information between
KRA departments. It also enables faster settlement of refund
without moving funds out of KRA.
Challenges
Kenyan VAT Administration has been faced with a number of
challenges in fulfilling its legal obligation in refund. These include:

High level of VAT refunds
The analysis above show that genuine refund claims currently
constitute 20% of total revenue. The trend has been increasing over
the 3 years from 17% in 1999/2000 to 20% in 2001/2002. Growth
rate of refund claims has also outstripped that of total revenue
collection.

Revenue Leakages
VAT refunds provide conducive opportunities for revenue leakage
both through fraud and erroneous refund claims. The trends over the
period under analysis indicate both very high annual growth and
percentage (255) of rejected claims to the claims judged. Forged
import and local purchase documents have been detected on several
occasions. A case of forged auditor’s certificate had also been
discovered.

Refund Backlog
KRA had committed in the Taxpayers Charter to pay refund claims
within 60 days. Current backlog status stands at 120 days and there
is no sign that the period will reduce. As a result, a huge amount
(approximately $25 million) of funds are tied up affecting operation
of the businesses and thus causing a lot of concern in both the
government and business sector. More over the Kenyan VAT
system has no provision for interest delayed refunds.
Refunds backlog as well provide opportunities for corruption.

Time Allocation
Refunds audits compete with normal audits.
Despite the
introduction of audit certificates the department has to allocate
substantial percentage of time and other resources to refunds audits.
5 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
The fact that 25% of refund claims (approximately $20 million) are
rejected points to the need to allocate adequate time to refunds audits
to avoid revenue loss.
6.0
WAY FORWARD
High level of refund claims and the increasing trends are real and here to stay.
This is portrayed by the fact that:
 Regular claims arising from exports, zero rated supplies and physical
capital investment contribute 98% of the total refunds. VAT
administration can do very little to control these claims.
 Exports of Horticultural and Floricultural are on the increase
 Kenya is currently doing a lot to maintain its lead in exportation to
COMESA and the East African Cooperation Region.
 Kenya is exploring possibilities of increasing its exports under the
opportunities provided by the AGOA.
 The increasing competition in the region for investors is also forcing
the government to provide tax relief as incentive for investment.
In view of the above the VAT administration has no alternative but to enhance
revenue collection to cope with the refund claims build up and also to meet the
ever-increasing demand for revenue at the Treasury. The solutions lie in the
Revenue Authority’s ability to strengthen its tax administration to maximize
revenue collection.
The way forward is therefore for the Authority to re-examine its business
processes and controls particularly in the following areas.








Strengthening and improving information systems.
Enhancing information sharing across the departments and within
section of the VAT Department.
Enhancing and improving audits both in quality and quantity.
Enhancing defaulters monitoring.
Enhancing customs controls and documentation to facilitate quick
reference of import and export documents.
Amending the Law to impose still penalties for fraudulent claims.
Enhancing investigation and prosecution of offenders.
Amending the Law to close any loopholes that relate to the
provisions of refund claims e.g. auditors certificate.
6 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
(Appendix 1)
VAT REFUNDS TRENDS
1.
2.
Number of Claims lodged
Years
1999/2000
2000/2001
2001/2002
No
3400
4700
4800
Monthly Average
283
395
400
Average claims
Average claimants
4300
358
350
% of growth
65%
21%
43%
Amount
44.6
64.9
76.4
% of growth
45%
18%
31.5%
Value of Disallowed Claims (US$000,000)
Years
1999/2000
2000/2001
2001/2002
Annual Average
5.
Amount claimed
51.5
64.9
76.4
Value of Claims Accepted (US$000,000)
Years
1999/2000
2000/2001
2001/2002
Annual Average
4.
39%
20.5%
Value of Claims lodged (US$000,000)
Years
1999/2000
2000/2001
2001/2002
Annual Average
3.
Growth Rate
Amount
6.2
19.1
25.2
% of growth
309%
32%
171%
Value of Claims paid (US$000,000)
Years
1999/2000
2000/2001
2001/2002
Annual Average
Amount
2,830
4,054
4,432
Growth Rate
43%
9%
26%
% of to accepted
80%
80%
73%
78%
7 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
6.
Annual Revenue Receipts (Local VAT) (US$000,000)
Years
1999/2000
2000/2001
2001/2002
7.
Growth Rate
19%
2%
Revenue Vs refund Claims (US$000,000)
Years
1999/2000
2000/2001
2001/2002
Average
8.
Amount
321.8
384.2
390.8
Amount
321.8
384.2
390.8
Growth Rate
44.6
64.9
76.4
% of to accepted
14
17%
20%
Composition of Refund Claims
Exports
Zero Rated Products
Capital Investments
Privileged Person
49%
27%
22%
2%
8 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
VAT 4
To be submitted in
duplicate
VALUE ADDED TAX DEPARTMENT
Official Claim No………………………….
Date received………………………………
CLAIM FOR REFUND OF VALUE ADDED TAX
This refund is to recover excess of input tax over output tax and tax paid under section 24 of the
Act during the period.
From…………………………………………………………….……to………………………………….
Name of business……………………………………………………………………………………………
Address……………………………....
Street………..….
Telephone……...……...
VAT Registration Certificate Number
Issued on…………………………….
PIN
Products/Services sold………………………………………………………………………………………
Claim computation from totals on reverse side
(Export claim for amounts less than KSh. 500.00 will not be accepted)
Total VAT claimed KSh (in words)……………………….……………………………………………..…
……………………………………………………………………………………………………………….
…………………………………….……………KSh (jn figure)…………………………………..……….
I certify that the Value Added Tax claimed above is properly refundable on the grounds stated in this claim
……………………………
Designation
……………………….
Signature
……………………
Date
BANK
BRANCH
A/C NO.
For Official Use Only
KSh…………………………………………
Audited and approved for payment in the amount Shillings…………………………..……………………
……………………………………………………………………………………………………………....
……………………………………………………………………………………………………………….
(in words)
Examined by………………………………………..…….
Date……………………….
Reviewed by………………………………………………
Date……………………….
Please attach VAT 3, Export documents, Auditor’s Certificate and Other relevant documents where applicable
9 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
VAT 4
To be submitted in
duplicate
Particulars of Amount claimed
Invoice
Date
[1]
Tax invoice/
Customs Entry
Number [2]
Name of supplier
Plus supplier’s VAT No.
[3]
Reason
For
Claimed [4]
Brief
Description
of supply [5]
Taxable
Value
[6]
Page……………………………..of…………………..TOTALS……………………………………………………….
*Please attach VAT 3, Export documents, Auditor’s Certificate and Other relevant documents where applicable
10 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
VAT
Claimed
[7]
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
VAT 4
To be submitted in
duplicate
VALUE ADDED TAX DEPARTMENT
Official Claim No………………………….
Date received………………………………
CLAIM FOR REFUND OF VAT ON TAXABLE GOODS IN INVENTORY
WHEN CERTIFICATE OF REGISTRATION IS ISSUED
To be submitted within 30 days after the date of Registration under section 12 of the
VAT Act, 1989
From…………………………………………………………….……to………………………………….
Name of business……………………………………………………………………………………………
Address……………………………....
Street………..….
Telephone……...……...
VAT Registration Certificate Number
Issued on…………………………….
PIN
Do solemnly swear that this claim for the sum of KSh (in words)………………………………………….
……………………………………………….KShs (in figures)…………………………
……………………………………………………………………………………………
represent the VAT paid on the taxable goods on hand at ………………………………..
(Please where goods in hand)
on the………………………….
(date of inventory)
Sworn before me this day………………………..of………………….at………………
………………………………
Commissioner for oaths
…………………………..
Signature of claimant
……………………
Position
For Official Use Only
Reviewed and Approved by
District Office……………….Date……………..
Name…………………………………………..
(Authorized Officer)
Proof accepted and VAT refund approved in the
amount of ………………………………………
Signature……………………………………….
……………………………………………………
KSh………………………………………………. Date…………………………………………..
…………………………………………………………
(Examining Officer)
11 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
VAT 5
Summary of VAT paid on Taxable goods in inventory
VAT Invoice/
Import Entry
Number
Page ……………...
Description
of goods
of……………….
Quantity
Hand on
…………..………….
Taxable
Cost
(KSh
TOTALS
12 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
VAT
Paid
(KSh
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
APPENDIX 4
VAT 407
Kenya Revenue Authority
REFUND CLAIM PROCESSING FORM
CLAIMANT………………………………………..
BOX………………………………………………...
PHONE……………………………………………..
CLAIM NO
DATE
RECEIVED
PERIOD
COVERED
AMOUNT
CLAIMED
VAT NO………………….
PIN………………………..
AMOUNT
DISALLOWED
AMOUNT
PAYABLE
AMOUNT IN WORDS
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
REVIEWING OFFICER
___________________________
SENIOR ASSISTANT COMMISSIONER
13 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
APPENDIX 5
VAT 407
ORIGINAL – COMPUTER
DUPLICATE – TRADER
TRIPLICATE – FILE
Kenya Revenue Authority
REFUND CLAIM PROCESSING FORM
CLAIMANT:
P.O. BOX
S/NO.
CLAIM NO.
VAT NO.
AMOUNT CLAIMED
KSH
AMOUNT ALLOWED
KSH.
AMOUNT DISALLOWED
KSH.
TOTAL AMOUNT DISALLOWED
DEFAULT PENALTIES REDUCTION ON CLAIMS
S/NO.
MONTH
DATE RECEIVED
VAT 3
DEFAULT PENALTY
REASON FOR REDUCTION
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_______________________
DATE
______________________________________
OFFICER IN-CHARGE – REFUND SECTION
14 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
APPENDIX 6
AUDITORS CERTIFICATE UNDER THE VAT REGULATIONS
(Registered Person)
Period(s) ended XX 199Y
We have examined the attached claim for refund of VAT amounting to
Kshs. xx made by (registered person) for the period from dd, mm, yy to dd,
mm, yy to ensure compliance with the Value Added Tax Act and
Regulations and have obtained all the information and explanations
necessary for the purposes of our examination.
Our examination was designed to enable us to obtain reasonable assurance
that the claim is free from material misstatement and included verification
on a test basis, of evidence supporting the amount claimed. It also
included an assessment of the adequacy of the (registered person’s) system
of recording and accounting for VAT.
In our opinion the attached VAT claim gives a true and fair view of the
amount claimed and is properly refundable under the Value Added Tax
Act and Regulations.
Certified Public Accountant
Date:
15 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
APPENDIX 7
e) Ensure that input tax in respect of imported goods is
properly supported by a Customs Entry form and contained
within an original KRA receipt for payment of duty and
VAT.
f) Ensure that tax has been properly accounted for in respect
of imported services.
g) Ensure the input tax does not relate to items scheduled on
the blocking order – VAT Order, 1994.
h) Ensure input tax has not been claimed in advance.
i) Trace the invoices to the relevant ledger accounts.
j) Confirm that the expenditure is business related and not
private.
6.
Obtain the workings supporting the output tax on the VAT
return, if any, and select a sample and perform the following
tests where applicable:
a)
b)
c)
d)
e)
Check that the correct rate of VAT was applied.
Ensure that the sales were accounted for in the correct tax
period.
Trace the invoices to the relevant ledger accounts.
In the case of exports, ensure payment has been received
in respect of the goods and services exported and the
proper documentation supporting export is in place.
Ensure that VAT has properly been accounted for in
respect of miscellaneous sales.
7.
Ensure, where applicable that VAT on intra-group transactions
has been properly accounted for.
8.
Ensure all VAT returns were submitted on time. If not, compute
the penalties and interest to be deducted from the claim, if the
trader has not done so.
9.
Prepare a statement analyzing the current claim.
16 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
17 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
18 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
19 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
20 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
21 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
22 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE
5TH FORUM FOR VAT ADMINISTRATORS IN AFRICA – 28TH – 30TH AUGUST 2002, KIGALI, RWANDA
23 – REFUNDS PROCEDURES, OPPORTUNITIES AND CHALLENGES – THE KENYAN EXPERIENCE