VAT-registered businesses that have more input VAT than output VAT build up a credit, and many wait a long time to claim it. The Finance Act, 2025 shortened two of the time limits that apply, so a claim that was safe last year may be out of time this year.

What changed

  • VAT refund claims. The period within which a taxpayer may lodge a claim for a VAT refund was reduced from 24 months to 12 months.
  • VAT on bad debts. The time after which VAT on a bad debt can be claimed back was reduced from three years to two years.

Both changes apply from the date stated in the Act, which for most of the 2025 changes was 1 July 2025. Check the transitional rules for credits that arose earlier.

Who is affected

  • Exporters, whose zero-rated sales create steady credits; see exporting from Kenya and zero-rated VAT.
  • Businesses with large capital purchases, such as a new factory or fleet, where input VAT exceeds output VAT for months.
  • Businesses with customers who do not pay, because the VAT charged on an unpaid invoice can be recovered only after the debt qualifies as bad.

An example

You have a VAT credit of KES 600,000 from the return for October 2025. Under a 12-month limit, your claim must be lodged by the end of October 2026. If you wait until 2027, the claim is out of time and you can only carry the credit forward, for use against future output VAT. A claim that you leave unused can also run out of time to be refunded. Work out your credit each month in the VAT return calculator.

What to do

  1. List your credits by return period, with the date the 12 months expires.
  2. Decide whether to carry forward or refund. If you will have enough output VAT soon, carrying forward is simpler.
  3. File the refund claim in good time, with all the supporting documents; see how to file a VAT return.
  4. Track each claim until it is paid. The free tax refund claim tracker records the claim, filing date, reference, approval and what is still owed.
  5. Review bad debts yearly. Written-off invoices should be reviewed before the two-year point.

Keep the paperwork ready

A refund claim needs valid tax invoices, import entries and proof of exports. Gather them as you go; the VAT input invoice register and the VAT returns register keep the claim documents and figures in order, and how to keep business records for KRA explains how long to keep them.

Cash flow

Refunds take time, so a business that depends on one should forecast it conservatively; see how to build a cash flow forecast. Credit control on your own customers also reduces bad debts; see invoicing and getting paid on time.

Stay up to date

Time limits are easy to miss in an Act of hundreds of pages. See how to follow tax changes in Kenya for ways to keep up, and the VAT guide for small businesses for the basics.

Time limits and transitional rules are set by the VAT Act as amended. Confirm them with KRA or a registered tax agent before you rely on a date.

Common questions

What does the shorter deadline mean in practice? A claim for a VAT refund must now be made within 12 months of the period in which the credit arose, instead of 24 months. A credit you leave unclaimed beyond that time can be lost, so review your VAT account every quarter.

Can I still claim input VAT carried forward? Input VAT can still be carried forward against future output VAT. The shorter time limit applies to asking for a refund of the credit in cash, not to using the credit against your own VAT.

What documents support a refund claim? Valid eTIMS invoices for purchases, customs entries for imports, export evidence for zero-rated sales and your VAT returns. Refund claims are checked closely, so the file should be complete before you lodge it.