KRA SUSPENSION OF TAX RELIEFS

On 28th February 2023, KRA announced that they had suspended processing and/or payment of reliefs to review the procedures. This is a culmination of an ongoing debate as to the impact of the reliefs on the tax base and the credibility of the beneficiaries.

Reliefs, refunds, exemptions, and frameworks for the same are part and parcel of a well-functioning tax system. They are generally anchored either in sound tax principles or government policy.

The announcement raised consternation and uncertainty in the market especially exporters who claim refunds of input VAT incurred to facilitate the export business. Withholding VAT credits was also a concern.

We expect that the suspension would be soon lifted to avoid major disruption. Instead, we will advise that KRA should instead conduct a case-by-case sampling of reliefs to verify if the law was adhered to. This power is already available to them under the Tax Procedures Act. The suspension is likely to delay the processing or payment of refunds. It is also likely to have an impact on pending applications for reliefs of different kinds

Our review of the reliefs available in law is that they are generally sound, merited, and consistent with the country’s economic and social goals.