Offsets and KRA's time to decide refunds
When a Kenyan client can offset overpaid tax against other tax debts, the time limits for claiming, and how long KRA has to decide and to pay.
By Achekam · · 4 min read · For Accountants & audit firms in Kenya
A client has paid more tax than it owed. Perhaps instalments ran ahead of a poor year, or withholding certificates covered more than the final liability. At the same time it may owe VAT or PAYE arrears. The finance director asks the obvious question: can one simply cancel the other, and if not, when does the money come back?
Kenyan law gives a clear framework for both. It lets the taxpayer choose between an offset and a refund, sets a limit on how long the claim can wait, and puts KRA on a clock to decide. The firm's job is to make the claim on time, choose the right route for the client's cash flow, and keep the dates in view.
Offset or cash: the client's choice
The Tax Procedures Act, as published on Kenya Law, lets a taxpayer apply to offset overpaid tax against other tax debts or to have it refunded. Section 47 is the provision; the text is in the Tax Procedures Act on Kenya Law.
The two routes suit different clients. An offset is useful where the client has arrears that are attracting interest: applying the overpayment against them stops that interest running on the part settled. A cash refund suits a client with no other debts and a need for working capital. Either way, the client applies; nothing moves on its own.
Five years for income tax, twelve months for the rest
The Act sets the window for applying: within five years of the overpayment for income tax, and within twelve months for any other tax. KRA's refund FAQs say the same for income tax, putting it as a claim made within five years from the date the tax was paid.
The difference between the two windows is where claims are lost. An income tax overpayment can wait while the firm assembles support. A VAT or other overpayment cannot. Diary the twelve-month date from the overpayment as soon as it is identified.
VAT has its own rules under the VAT Act, as published on Kenya Law. Excess input tax is carried forward to the next period as a matter of course, but the Commissioner refunds an excess arising from zero-rated supplies, or from tax withheld by appointed withholding agents, if the claim is lodged within twelve months from the date the tax became due and payable. An exporter or a supplier to withholding agents is the typical client here; the detail is in refunds of excess input VAT.
KRA's time to decide, and deemed approval
The Act puts the Commissioner on a clock. A decision on the application must be made within one hundred and twenty days, or one hundred and eighty days if the claim is audited. If no decision is made in that time, the application is deemed approved.
Deemed approval is the point clients most often miss. A claim that has sat with KRA past the decision period without a response is not simply delayed; under the Act it is treated as approved. Keep the date the application was lodged, and whether KRA said it would audit, so that the firm can tell when the period ended.
Expect an audit for a new claimant. KRA says all first-time refund claimants are subjected to a pre-payment audit, and that all claims must have valid debt status reports before processing. In practice, check the client's debt position on iTax before lodging, so that the report KRA asks for raises no surprises.
Payment within six months of ascertainment
Approval is not payment. The Act requires the Commissioner to refund within six months of ascertaining the amount. For cash-flow planning, a client should therefore treat a refund as money that arrives after the decision period and then up to six months more, not as cash in hand.
A worked example in words. A first-time claimant lodges an income tax refund claim. KRA audits it before payment, which means the longer decision period applies. Once the amount is ascertained, KRA then has up to six months to pay. A client relying on that cash for a supplier payment in the same quarter is planning on the wrong timetable; an offset against its own VAT arrears might serve it better.
Keeping the claim and its dates in Achekam
Staff can open a Kenyan tax profile for the client and start returns that move through prepare, review and approve by different people. The return that produced the overpayment, and the payments behind it, are therefore on file with their approvals. Tax payments are recorded with KRA's reference and confirmed by another person; Achekam does not pay the tax. That record of who paid what, and when, is the support a refund or offset claim needs.
Where KRA's response to a claim comes as an assessment the client disputes, Achekam computes the objection and appeal deadlines from its approved administration rule, ending at the close of the day in Nairobi time. Its filing calendar leaves out any deadline whose rule is awaiting approval or contested and says why. For the wider picture of how long KRA has to reopen a year, see assessment time limits in Nigeria and Kenya.
Advising on timing
Put the choice to the client in a short note:
| Question | Offset | Refund |
|---|---|---|
| Does the client owe other tax? | Settles it and stops interest on it | Debts must still be cleared separately |
| How soon is the benefit? | When the offset is applied | After the decision period and up to six months more |
| Time limit to apply | Five years for income tax, twelve months for other taxes | The same |
Then give the dates: when the claim must be lodged, when KRA's decision period ends, and when deemed approval would apply. A client who understands those three dates rarely has to chase a refund blindly. For the income tax claim itself, start with claiming an income tax refund.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
