Getting a Refund For Overpaid or Erroneously Paid Tax

Discovering you’ve overpaid your taxes can be frustrating, but Kenyan law provides a clear, if detailed, pathway to get your money back or have it applied to other liabilities. This guide breaks down the official process under Sections 47, 47A, 47B, and 48 of the Tax Procedures Act,.

Step 1: Your Initial Choice – Offset or Refund?

The first decision is crucial and depends on your financial needs. You must formally apply to the Commissioner of Domestic Taxes for one of two remedies:

• Option A: Apply for an Offset (Section 47(1)(a))
• Option B: Apply for a Cash Refund (Section 47(1)(b))

Step 2: The Application & KRA’s Verification Clock

Once you submit your application on the iTax portal, a strict legal timeline begins.

1. Standard Processing Time: The Commissioner has 120 days to “ascertain and determine” your application (Section 47(2)).
2. If Your Application is Audited: The KRA may subject your claim to an audit (Section 47(4)). If so, the timeline extends to 180 days (Section 47(4A)).
3. The “Deemed Approval” Rule: This is your powerful safeguard. If the KRA does not make a decision within the 120 or 180-day period, your application is automatically deemed approved by law (Sections 47(3) & 47(4A)).

Step 3: The Outcome – What Happens After Approval?

The result differs based on your initial choice and the law’s specific priorities.

• If You Applied for an Offset: The KRA will apply the overpaid tax to your specified debts or future liabilities (Section 47(2)(a)).
• If You Applied for a Refund: The process has more steps:

The 6-Month Payout Rule: Upon ascertaining an overpayment, KRA must issue the refund within 6 months. If they fail, the amount must instead be used to offset your other tax debts (Section 47(2)(b)).

Mandatory Order of Application (Section 47(5)): Before you see any cash, the law requires KRA to use your overpayment in this exact order:

1. To pay any other tax you owe under the specific law related to the overpayment (e.g., use a VAT overpayment to settle other VAT debt).
2. To pay any tax you owe under any other tax law.
3. Any remaining balance is finally refunded to you.

Step 4: Special Scenarios

• Instalment Tax Overpayments (Section 47(9)): Overpaid instalment tax is treated specially. The Commissioner must automatically offset it against your next instalment liability. Be aware that if KRA later reverses its decision, the offset amount becomes a tax due in the next period with backdated interest (Sections 47(10)-(12)).
• Tax Paid in Error (Section 47A): This is a broader category for tax that was never legally due. You can apply for a refund, and the Section 47 procedures (steps, timelines, audit) apply.
• Late Refund Interest (Section 47(6)): If KRA misses the 6-month refund deadline, you are entitled to interest at 1% per month on the overdue amount.
• Erroneous Refunds (Section 48): If KRA refunds you in error, they can demand repayment. If not settled within 30 days of demand, it attracts 1% monthly interest (capped at 100% of the principal).

Step 5: Your Right to Appeal

If you disagree with the KRA’s decision on your application—whether a full or partial rejection—you have the right to appeal to the Tax Appeals Tribunal within 30 days of being notified of the decision (Section 47(13)).

Actionable Checklist for Taxpayers

1. Gather Evidence: Compile all proof of payment, filed returns, and calculations showing the overpayment.
2. Make Your Choice: Decide between offset (for managing liabilities) or refund (for cash flow), keeping the strict deadlines for refunds in mind.
3. File Formally on iTax: Use the prescribed form on the KRA iTax portal. Do not assume automatic offsets.
4. Diary the Deadlines: Note the 120/180-day “deemed approval” date and the 6-month refund payout date.
5. Monitor & Follow Up: Track your application status. If deadlines pass, formally notify KRA of the “deemed approval.”
6. Seek Professional Advice: For complex or high-value claims, consult a tax professional to ensure compliance and optimize your outcome.

Disclaimer: This article provides general information only and does not constitute legal or tax advice. Tax laws are complex and subject to change. Always consult qualified professionals for advice specific to your situation.