1. What is VAT?
Value added tax or VAT is a tax applied to taxable goods or services at each level of the production chain. Right from when a supply is sourced and manufactured, to when it is sold to the final consumer, VAT is applied and carried forward to subsequent levels of the supply chain until the final buyer pays the VAT amount. This amount is collected by the seller and remitted to the tax authorities.
2. What supplies are non-taxable?
Non-taxable supplies include medical supplies, unprocessed agricultural products, financial services, and more.
3. What are the VAT rates in Kenya?
The VAT rates in Kenya are 16% for taxable goods, 8% for exports, and 0% for zero-rated/exempt goods.
4. How do I calculate my VAT?
VAT is the difference between the output VAT (the VAT you charge your buyer while making a sale) and the input VAT (the VAT you pay to your seller when you make a purchase intended for resale).
5. How can I register for VAT?
You can register online via iTax, the official portal to register and file returns.
6. Should I register for VAT if I’m an online seller?
Yes, you should register for VAT if you’re a nonresident, online business making B2C sales in Kenya. There’s no threshold required for registration. Do note that you won’t be eligible for input VAT deductions, however. A 16% VAT rate is applicable for online services as well.
However, you don’t have to charge VAT for taxable sales made to B2B customers. The latter will have to account for it under the reverse charge mechanism.
7. When should I file my returns?
You should file your monthly returns by the 20th of the following month via iTax.
8. How do I make the VAT payment?
To pay the VAT amount, you have to generate an e-slip from the iTax portal. This slip can be used to pay the tax amount in person to a KRA-appointed bank. You can also authorize your bank to pay the VAT amount via direct credit to the commissioner’s account at the Central Bank of Kenya.
9. How do I regain the VAT amount I paid to a seller while buying a product that is meant for resale?
Any excess amount that you have paid on VAT can be regained through input tax credits while filing your VAT return. However, ensure that you claim these credits within six months of your sale.
10. How can I claim input VAT credits?
You can claim an input VAT deduction (paid at the time of making a purchase) while filing returns. Any additional VAT you would have incurred can be deducted from the tax payable on your return.
11. Will there be any consequences for late filing or payment?
Yes, there will be a penalty of Ksh 10,000 or 5% of the due tax amount if you file your returns late. If you don’t pay the VAT on time, you will have a penalty of 5% of the due tax amount and an interest of 1% (on the unpaid tax) per month until the whole amount is paid.
12. What are the VAT charges that will apply if I’m importing goods?
Imported goods are subject to import duty at different rates: 0% for raw materials and capital goods, 10% for intermediate goods, and 25% for finished goods.
13. What does it mean to withhold VAT?
Withholding VAT is a process where agents appointed by the government collect a portion of VAT (2% of the value of the taxable supplies) from payments made to sellers. The withheld VAT amount is remitted by the agent on the 20th of the month following the deduction.