The Weekly Pulse | 21st February 2020

KAM meets KRA Top Leadership
Kenya Association of Manufacturers (KAM) and the Kenya Revenue Authority (KRA) Boards held a fiscal strategy session, led by KAM Vice-Chair, Mr Mucai Kunyiha and KRA Board Chair, Amb. Francis Muthaura on Tuesday, 18th February 2020.

The issues discussed include:
1. Implementation of lower Railway Development Levy (RDL) and Import Declaration Fee (IDF) rates:
KRA informed KAM that the National Treasury is at the tail-end of scrutinizing the comprehensive list of manufacturers and their raw materials/intermediate goods. The list should be forwarded to the Commissioner of Customs before the end of this week for implementation.
The list of 13 pharmaceutical companies has already been received from Treasury for implementation by KRA after it was approved by the Ministry of Industry, Trade and Cooperatives.
The Integrated Customs Management System (ICMS) has been configured to support automatic processing of applications for lower IDF/RDL for raw materials and intermediate goods.

2. Budgetary allocation for VAT and excise tax refunds
The Authority has written to Treasury for a one-off budget allocation of Kshs 22 Billion to clear outstanding VAT Refunds.
KRA has also requested Treasury for an increment of monthly allocations meant for VAT Refunds from the current Kshs 1.2 Billion to Kshs 2.5 Billion from the next financial year (2020/2021).
KRA also added that verification of VAT Refund applications is cumbersome due to various irregularities that arise out of the applications.

3. Refund of excess credits arising from WHVAT
KRA committed to expediting the configuration of the iTax platform to support manufacturers’ applications for refunds. Manufacturers should submit their complaints through KAM for onward transmission to KRA for resolution.

4. Migration of legacy final ledger balances to iTax
KRA has resolved internally that they will require clients to maintain records for five years prior to the current financial year based on the Tax Procedures Act as opposed to previous demands for records dating back to 1992.

5. VAT Auto Assessment system (VAA)
KRA noted that they have unearthed many inconsistencies and illegal entries such as double entries and credit notes issued after input tax has been paid among other issues.
KRA further noted that they are not issuing assessments to taxpayers but notifications and that VAT Auto Assessment shall be extended to the period covering June 2018 to date.
KRA shall thereafter issue notifications to affected members with an extended time for the provision of invoices, delivery notes and proof of payment.
They also agreed to fast track the full roll-out of the Tax Information Management System (TIMS) which is set to replace the VAA system.

6. Excisable Goods Management System (EGMS)
KAM challenged the Public Notice issued on Friday 14th February 2020 which demanded that all bottled water, juices, energy drinks, soda and other non-alcoholic beverages manufactured or imported to Kenya prior to 13th November 2019 to be allowed in the market up to 29th February 2020.
The Association also challenged that remaining stock after 29th February 2020 should be affixed with excise stamps for the products to be allowed into the market.
KRA responded that:
  • Some manufacturers of bottled water, juices, energy drinks, soda and other non-alcoholic beverages have written to the Authority requesting that the 29th February 2020 deadline be adhered to.
  • KRA’s Surveillance Team has discovered that some bottled water, juices, energy drinks, soda and other non-alcoholic beverages have been backdated before the go-live date and if the extension is granted, such products will establish an unlevelled playing field with already compliant manufacturers.
  • Some manufacturers of bottled water, juices, energy drinks, soda and other non-alcoholic beverages have been ordering stamps indicating a willingness to comply with the Public Notice of 14th February 2020.

KAM insisted that it would be unfair to manufacturers if the deadline is not extended despite the above reasons provided by KRA.

As a way forward, KRA requested that manufacturers of bottled water, juices, energy drinks, soda and other non-alcoholic beverages who prefer extension of the date from 29th February 2020 should urgently re-submit data, through KAM, on stock levels in warehouses and along the supply chain with a view of subjecting the data to scrutiny. This will help KRA to grant a case-by-case extension where necessary.

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