🧾 Value Added Tax (VAT) in Kenya

VAT is a consumption tax charged on the supply of taxable goods and services in Kenya. It's collected at each stage of the supply chain and ultimately borne by the final consumer.

VAT Category	Rate	Examples
Standard Rate	16%	Most goods and services
Zero-Rated	0%	Exports, basic food items, agricultural inputs
Exempt	N/A	Financial services, education, healthcare, residential rent

                        📊 Registration Threshold: You must register for VAT if your taxable supplies exceed or are expected to exceed KES 5 million in any 12-month
                        period.
                    

📋 VAT Registration Requirements

Mandatory Registration

Annual taxable turnover exceeds KES 5 million
Importers of taxable goods
Suppliers of digital services to Kenya

Voluntary Registration

Businesses below the threshold can voluntarily register if they:

Make zero-rated supplies (to claim input VAT refunds)
Want to appear more credible to VAT-registered customers
Expect to exceed the threshold soon

📅 Filing Deadline: VAT returns must be filed and tax paid by the 20th day of the month following the tax period.

📋 Step-by-Step VAT Filing Guide

1

Compile VAT Records

Gather all sales and purchase invoices for the month:

Output VAT: VAT charged on your sales
Input VAT: VAT paid on your purchases

2

Log in to iTax

Visit itax.kra.go.ke and log in with your business KRA PIN.

3

Navigate to VAT Returns

Click "Returns" → "File Returns" → Select "VAT".

4

Enter Output VAT (Sales)

Enter details of your taxable supplies:

Standard rated supplies (16%)
Zero-rated supplies (0%)
Exempt supplies

5

Enter Input VAT (Purchases)

Enter VAT paid on business purchases:

Local purchases
Imported goods
Services from non-residents

💡 Only claim input VAT on purchases used for taxable supplies. VAT on exempt supplies is not claimable.

6

Calculate Net VAT

The system calculates: Output VAT - Input VAT = Net VAT Payable

If positive: You owe KRA
If negative: You have a VAT credit (can be carried forward or refunded)

7

Submit and Pay

Submit the return and pay any VAT due via M-Pesa Paybill 572572 by the 20th.

📊 VAT Calculation Example

Monthly VAT Calculation:

Total Sales (VAT inclusive)	KES 1,160,000
Output VAT (16/116 × 1,160,000)	KES 160,000
Total Purchases (VAT inclusive)	KES 580,000
Input VAT (16/116 × 580,000)	KES 80,000
Net VAT Payable	KES 80,000

📄 VAT Invoice Requirements

A valid VAT invoice must contain:

The words "TAX INVOICE" prominently displayed
Supplier's name, address, and PIN
Customer's name, address, and PIN (for B2B)
Invoice number and date
Description of goods/services
Quantity and unit price
VAT amount shown separately
Total amount inclusive of VAT

⚠️ eTIMS Requirement: From 2024, all VAT-registered businesses must use the electronic Tax Invoice Management System (eTIMS) to generate compliant invoices.

💰 VAT Refunds

You may be entitled to a VAT refund if:

You make zero-rated supplies (exports)
Your input VAT consistently exceeds output VAT
You're a diplomatic mission or international organization

Refund Process:

File VAT returns showing credit balance
Apply for refund on iTax
KRA conducts verification/audit
Refund processed (typically 90 days)

⚠️ Penalties

Late Filing

Higher of 5% of tax due or KES 10,000

Late Payment

5% of tax due + 1% interest per month

Failure to Register

KES 100,000 or double the tax evaded

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