KRA appoints certain persons to be VAT withholding agents. The agents withhold VAT at 2% of the total amount payable. Thus if you sold an item at Sh. 116 (inclusive of VAT) to withholding agent, he will withhold Sh.2 thus pay Sh. 114. The VAT payable by the supplier remains Sh.16 which has to be paid on the due date, he will however claim the Sh.2 withheld when the withholding agent has remitted such amount. Withholding agents are required to remit to the Commissioner on the 20th day of the month following deduction.
Where excess of VAT payable arises out of amounts withheld by an agent, such excess amounts be applied against VAT payable or us due for refund. The registered person lodges the claim for the refund of the excess tax within twenty-four months from the date the tax becomes due and payable. For taxpayer with credits arising prior to this changes (July 2019) a 12 month window was allowed for claiming refunds for amounts that were due within thirty six months prior to the commencement date. (Miscellaneous amendment act 2019)