KAM CEO’s Brief | 12th October 2018

KAM engages KRA on Fiscal Policy challenges hindering the growth of Industry

Kenya Association of Manufacturers (KAM) engaged the Kenya Revenue Authority (KRA) on Tuesday, 9th October 2018 to discuss key fiscal policy challenges hindering the growth of the manufacturing sector.

The deliberations were based on Members’ feedback to KAM on new and pending fiscal challenges faced by manufacturers.

Among the issues discussed include:

1. VAT Export Refund Formula: 

• KRA reported that the proposal to review the formula is already with the National Treasury, adding that they were undertaking a legal route to review the formula.

2. Withholding VAT (WHVAT):

• KRA noted that there is a provision to exempt manufacturers who are in a perpetual credit position, which would solve the problem going forward.
• On credit amounts tied up, KRA pointed out that the law doesn’t expressively provide for the offsetting of credits with other taxes. However, the Authority committed to review and find a solution to this.
• KAM proposed the reduction of WHVAT rate 2% from the current 6%. KRA stated that it has to be done through a budget process. Additionally, the Authority shall be carrying out an analysis to determine the optimal WHVAT rate.

3. New KRA requirements for VAT refunds:

• Some manufacturers had reported receiving letters from KRA demanding proof of exportation of goods as a prerequisite of VAT Refunds. KRA pointed out that this was necessitated by difficulties in confirming Form C17.
• KRA noted that they will write to affected manufacturers to clarify that the only requirement is a certificate of export.

4. Excise Tax Refunds for Kerosene:

• KRA reported that procedures and forms for the claim are complete. They are however finalising on the automation process for reclaiming the refunds.
• A meeting will be held between KAM and KRA in November 2018 to review procedure, claim forms and automation.

5. 35% import duty imposed on metal sector raw materials:

• KRA pointed out that their classification is not based on the applicable duty rate but on the correct tariff.
• KRA Head of Valuation shall be engaging affected manufacturers on 11th October 2018 to establish proper classification.