i) Income Tax Refunds

An income tax refund arises when a taxpayer – either  individual or corporate has overpaid taxes to the Kenya Revenue Authority.

Some of the common scenarios that may warrant an Income tax Refund include:

• Over-deduction of PAYE by an employer.
• A Tax Exemption on account of disability for persons with an approved exemption certificate
• Overpayment of Instalment Taxes common for corporate and consultants
• Mortgage Interest Relief (Home Loan Repayment incentives)
• Insurance Premium relief (on qualifying life or education policies)
• Personal tax relief and other statutory reliefs.
• Withholding Tax (WHT) overpayments (E.G Where WHT exceeds final liability)
• Advance tax credits (mainly for commercial vehicles or Public Service Vehicles)

Important Points to Note:

1. Income tax Refund claims must be made within 5 years from the date the tax was paid as per the 2025 Finance Bill.
2. A taxpayer must provide credible supporting documentation showing proof of payment and income declarations.
3. All Income Tax refund claims must be submitted via iTax and are subject to KRA review and Audit.

ii) VAT Tax Refunds in Kenya

On the other hand, VAT Refunds occur when a taxpayer has paid more VAT than they are required to. 

It mainly occurs due to:

• Excess input tax paid by a business 
• Overpayment of tax
• Unpaid debts from customers

Common Triggers for VAT Refunds

1. Zero-Rated Supplies:

• Exporters and businesses that deal in Zero-rated goods or services often accumulate more Input VAT (VAT on Purchases) than Output VAT, creating excess credits eligible for refunds. 

(Read more about Input VAT and Output VAT on our VAT Guide) 

2. Withholding VAT

• When VAT is withheld by appointed agents (e.g. government bodies), the supplier ends up paying VAT but doesn’t collect the full amount – leading to Excess credits.

Withholding VAT Example:

Scenario:

• A company, ABC Supplies Ltd, provides office furniture worth Ksh 1,000,000 (exclusive of VAT) to a government ministry (a Withholding VAT agent).
  
  
• The standard VAT rate in Kenya is 16%, so the VAT on this transaction is Ksh 160,000.
  

However, because the ministry is a Withholding VAT agent, they do not pay the full Ksh 160,000 to ABC Supplies Ltd. Instead:

• The ministry withholds 6% of the VAT (i.e., Ksh 60,000) and remits it directly to KRA.
  
• The ministry only pays ABC Supplies the balance:
  
  • Ksh 1,000,000 + Ksh 100,000 VAT = Ksh 1,100,000
    

Impact:

• ABC Supplies Ltd must still declare and pay the full VAT of Ksh 160,000 to KRA in their return.
  
• But they’ve only received Ksh 100,000 in VAT from the client.
  
• The withheld Ksh 60,000 becomes a Withholding VAT credit — a form of excess VAT the business can either claim as a refund or carry forward to offset future VAT liabilities.

3. Bad Debts

• If a taxpayer made a supply, paid VAT, but never received payment:
• They may apply for a refund after 3 years but within 4 years from the date of supply.

iii) Excise Tax Refunds in Kenya

A refund of excise duty arises when a person / business dealing with excisable goods (Manufactured in or imported into Kenya) has paid excise duty but certain qualifying conditions apply.

When can Excise Duty be Refunded?

The Commissioner may grant a refund of excise duty upon application if satisfied that:

1. Non-Consumption in Kenya: 

• The goods were not consumed or used within Kenya

2. Loss During Transit

• The goods were damaged or stolen during transportation before reaching Kenya

3. Goods Returned to Supplier:

• The buyer returned the goods in accordance with the terms of the sale contract.

4. Use in Manufacturing Non-Excisable Goods:

• In the case where spirits or illuminating kerosene were used by a licensed/registered manufacturer to produce inexcusable goods.

Example 

A licensed beverage company pays excise duty on spirits. If part of those spirits are later used to produce cleaning supplies (which are not excisable), the company can apply for a refund of the duty paid on that portion.