What Has Changed?
The Finance Act, 2026 amended Section 31 of the VAT Act by changing the minimum qualifying period for a VAT refund on bad debts from two years to three years.
When Can a Business Apply?
A registered person who has:
- Made a supply;
- Accounted for and paid the VAT; but
- Has not received payment from the customer,
may apply for a VAT refund on the bad debt after three years from the date of the supply, subject to the requirements of the VAT Act.
The qualifying period for VAT bad debt relief is now three years instead of two years.
What Should Businesses Do?
Businesses should review their outstanding receivables, credit management procedures and documentation for bad debt claims.
They should also maintain clear records showing the date of supply, VAT accounted for and paid, customer payment history and recovery efforts.
Key Takeaway
The Finance Act, 2026 extends the minimum waiting period for a VAT bad debt refund from two years to three years.
Source: Finance Act, 2026 — Section 31 of the VAT Act.
TAX HOME KENYA
Simplifying Your Tax Journey.
📱 WhatsApp: +254 725 416 982
📧 taxhomekenya24@outlook.com