The Kenya Revenue Authority owes flower farmers more than Kshs.2 billion in Value Added Tax (VAT) refunds, says Mrs. Jane Ngige Kenya Flower Council Chief Executive.
According to Mrs. Ngige, some farms are claiming up to Kshs.100 million in refund a situation she says has affected the operations of these companies.
Mrs. Ngige noted that flowers for export are zero-rated and are therefore exempted from VAT to counter trade imbalance between exports and imports from and into the country.
The zero-rating concept was introduced in the VAT system to enable exporters, manufacturers and suppliers of zero-rated goods and services to claim refund of tax paid on inputs incurred during the purchase of supplies.
It was also meant to ensure that funds used by exporters, manufacturers, and suppliers of zero-rated farm inputs are not unnecessarily tied down in taxation.
Before refund is made, KRA insists claimants of over one million shillings and above submit an auditor’s certificate as provided under Value Added Tax regulation 13A. This requirement applies as well to claims arising from the withholding VAT system.
In an effort to solve this impasse, Mrs. Ngige says that KFC has on several occasions held talks with KRA but the taxman asserts that the system which has the validated figures on what each farm is claiming is faulty.
“The industry may in future not expand as expected at the county level if the government fails to make refund on VAT on time as an incentive to encourage investors,” the Administrative Manager of PJ Dave Flower Farm at Isinya, Amos Kiarie located 65 Kms from Nairobi along the Kajiado-Namanga Highway.
Recently three horticulture companies, Finlay Horticulture Kenya Ltd, James Finlay and Jet Flowers Ltd, moved to court demanding an order to compel KRA to pay a refund of Kshs.1.2 billion.
These firms’ which grows and exports horticultural produce are demanding the refunds to be released to them at 26.8 per cent.
According to these firms, KRA and Ministry of Finance has violated their rights and fundamental freedoms and the Constitution for denying access to their claims.
In a recent visit to flower farms, Hortinews discovered that the story is more or less the same in these farms.
Ol-Njorowa Farm General Manager Mr. David Mousley describes claims of tax refund as a ‘nightmarish experience’. He says KRA owes the company tax refunds running into millions and efforts to claim it has been exasperating.