Deciphering Kenya’s VAT Landscape
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Value Added Tax (VAT) is an indirect tax applicable to the consumption of taxable goods and services in Kenya and on imported items. It’s paid by the end consumer for goods and services supplied within Kenya or brought into the country.
Eligibility for VAT Registration
Any entity supplying taxable goods and services, with a value exceeding Kshs 5 Million annually, is required to register for VAT. Voluntary registration can be considered for those not meeting the threshold, subject to conditions. VAT-registered entities are assigned Personal Identification Numbers (PINs) with a VAT obligation.
To register, visit eTIMS or seek assistance at any KRA Tax service office or eTIMS operation unit at JKUAT building, 8th floor, Kenyatta Avenue.
How VAT Operates
VAT operates under the Input/Output Tax system:
- Input tax is the tax paid on business-related purchases.
- Output tax is charged on the sales of taxable goods or services.
- Tax payable is the difference between Output tax and Input tax.
Example of VAT Calculation
| Description | Amount (Kshs) | VAT Rate | VAT Amount (Input/Output) |
|---|---|---|---|
| PURCHASES | |||
| Purchase net price | 10,000 | 16% | 1,600 |
| Gross purchase price | 11,600 | ||
| SALES | |||
| Gross purchase price | 11,600 | ||
| Less VAT paid | 1,600 | ||
| Net Purchase price | 10,000 | ||
| Add 20% profit margin | 2,000 | ||
| Net Sales Price | 12,000 | ||
| Add 16% VAT (Output Tax) | 16% | 1,920 | |
| Selling Price | 13,920 | ||
| Tax payable | 320 |
VAT Rates
- 16% (General rate) applies to most taxable goods and services.
- 0% (Zero-rate) applies to specific supplies listed in the Second Schedule to the VAT Act, 2013.
Due Date VAT, including returns and payment, is due on or before the 20th day of the following month. Use iTax for online submissions.
