Kenya’s VAT Challenges on Repossessed Goods: Navigating Complexities in the Credit Market

• VAT treatment of repossessed goods is a growing issue in Kenya’s credit market.
• Asset-backed credit is increasing, raising questions about VAT on repossessed goods.
• Credit provision is VAT-exempt, but resale of repossessed assets is seen as taxable by KRA.
• This view complicates matters for secured lenders who repossess and resell assets.
• Resale is argued not to be a typical commercial transaction, adding compliance burdens.
• Input VAT is irrecoverable as initial credit transactions are VAT-exempt.
• Other countries have addressed similar issues to ensure VAT neutrality.
• The Finance Bill, 2025, considered proposals to clarify VAT treatment of repossessed goods.
• The issue remains unresolved, creating uncertainty for financiers.
• Aligning tax policy with commercial reality is crucial for clarity and fairness.

Source: wts.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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